Best Ways to Compete in Multiple Offer Scenarios
Let’s be real here - real estate is HOT right now, and it’s more competitive than it has ever been to be a buyer in the Denver market. Especially for mid-century modern homes, which always sell at a premium, in a flash.
How can you be more competitive so that you can win multiple offer scenarios and get your dream home? There are a few simple ways to make your offer more competitive when you know that you’re going up against steep competition for the “cream puff” houses - a.k.a.. the hottest listing of the week that everyone has to have. Work with your agent (hopefully us!) to work with you in assessing your level of risk in these scenarios, because they do have real life implications, and also to coach you through these circumstances and the important nuances that come with them.
Offer the highest price. This is the most obvious tip, but most people are motivated by money when selling their home. If you are the highest offer, it doesn’t always mean you will win, but it definitely helps. Work with your agent to see the comps in the neighborhood as well as data showing offer history in the area to craft your final purchase price submission. Most homes in our market are going for asking price if not WAY above.. many being $25K+ or more above list price. I’ve seen mid-century modern homes in our market go up to $150K above asking in some scenarios.
Make your offer look more like cash, if you have a loan. Cash buyers come out to play more during the end of the year when they need to offload some of their liquid assets for tax purposes. Keep this in mind when in the hunt for property. If you want to compete against the cash buyers (wealthy out of staters, investors, etc.) you need to make your offer look more like cash. Cash buyers typically have a two week close, no appraisal, no inspection (but keep Inspection Termination, typically), and are the highest price. Work with your agent and your lender to figure out how you can make this work for you financially.
Remove any contingencies and have a game plan if you ARE contingent. It’s safe to say that if you are a buyer in this market and you are still contingent, you have even more of an uphill battle than the average buyer and that your offer isn’t likely to get accepted in “flash sale” scenarios - basically homes that pop on the market and are gone after the weekend. You’re more likely to have a contingent offer accepted on a home that has been sitting for a month, but it’s also likely that there is a reason why nobody has picked that property up yet if it’s still sitting. Work with your agent and lender to figure out how to remove the uncertainty surrounding your contingency, whether that be through the financing side with tools like a bridge loan, or by identifying an off market buyer lined up to purchase your home once you find your next dream property, to ensure a smooth transaction. Sometimes its easier to sell, have a short term rental, and then buy again, the remove the contingency. I always tell buyers who are contingent that “if you want the luxury of living in your home on the sell side while you are shopping, you may need to pay a premium on the buy side”, and this stands true, to get what you want.
Work with a lender that can help you buy the house in cash for you, then loan out your mortgage to you after closing. There are new companies out there like Accept.inc that will buy your house in cash for you, make sure you still are qualified for a loan that is run through underwriting, and then after you close in cash, will finance the property for you and service your loan. These companies aren’t all created equal, so discuss with your agent what their experience is in working with lenders like this.
Waive appraisal, or implement a strong appraisal gap. If you have 20% down in cash, you can work with your lender in some circumstances to waive appraisal altogether. If you don’t have 20% in cash available, but have a little extra dough to play around with, a strong appraisal gap is essential in this market. Remember that just because you are the highest offer above asking, doesn’t mean that you are the best, unless you have an appraisal gap to make up the difference and make the seller feel more comfortable about accepting your offer. The comps need to support your purchase price, or you need to come to the table with an appraisal gap. Sometimes the home will even appraise at your price above asking, but if it doesn’t, be prepared to overpay and shell out some extra cash at the closing table.
Be the first showing and the first submitted offer. Some sellers don’t care about price as much as they care about seeing the first offer come in fast. Sounds crazy, but it’s true. Typically the first offer is the most motivated buyer of the bunch. This means that during the home search process, you need to watch new listings pop up like a hawk, be the first one to set a showing, and be the first one to submit an offer. Timing isn’t always everything, you have to submit a strong, well rounded offer as well, but it helps a lot, especially in lower price points.
Submit love letters with your offer. This recommendation comes with a huge grain of salt. Not all listing agents will show love letters to their sellers, and many typically don’t. The caution here is running into Fair Housing Violations - you cannot as the buyer disclose if you are a part of a protected class. I coach buyers who want to write love letters to specifically focus on the house and what they love about it and to keep the personal details out of it. You also don’t want this to hurt your offer and have a seller discriminate against you based on whatever information you disclose about yourself. It’s a tricky solution, but there have been times where sellers have selected offers when they are torn between two of them, based on a love letter submission.
Have your agent and lender build rapport with the listing agent. Every agent wants to work with another agent on a deal who is going to be hardworking, agreeable, and communicative. It’s important to note this when selecting your buyers agent. Are they a nice person who can build a relationship over the phone? Having your buyers agent and lender call the listing agent and chat through your offer and “make small talk” can sometimes make a world of difference - your offer is more likely to be accepted if you have a great agent. Consider us to be this for you ;)
Waive inspection or have a light inspection clause. Buying a house in as-is condition can be a scary predicament for a buyer, so if you go this route, know what you’re getting into. Every buyer has the right to an inspection and even in an as-is sale, there should be an Inspection Termination deadline in case you find something that makes you want to get out. If as-is is too extreme of a scenario for you (and understandably so), there are a handful of different clauses that can be used in additional provisions to show the seller that you will be reasonable. As a seller, nothing sucks more than to pick up a great buyer with a great offer who then totally nickels and dimes you on small, unimportant items during Inspection Objection. These clauses ensure that you aren’t going to take them to the cleaners. Work with your agent to discuss your different options here.
Offer more earnest money down. Not always a game changer, but sometimes it looks attractive to the seller to know that you have more skin in the game up front in terms of cash down, in case anything happens during the transaction and you lose your earnest money.
Close as fast as possible. Identify lenders to work with who can process your loan lightning fast. Typically with sellers, the quicker you close, the faster they get their cash.. so do what you can to have the fastest turnaround times in your dates and deadlines - from inspection to appraisal to closing, to get it over with for the seller in a painless way.
These are just a few of many tips to be more competitive in your home search process and WIN your dream property. Contact me for more information if you are a buyer in this market looking to gain a competitive edge and we can discuss other strategies outside of what has been listed here!