There is a myth that real estate agents love a hot market. Maybe some do, but the truth is, most of us prefer a “good” market. The kind of market where the average listing is selling in 30-60 days, but where every offer you make doesn’t have competition. Multiple offer situations are difficult for everyone, surprisingly enough, even sellers.
Though every seller dreams of having multiple offers that drive up the price of their home, in reality, it can become a problem. Which offer to choose? The buyers who win often have some remorse, feeling that they were the “suckers” who paid too much and have a much higher rate of walking away or trying to heavily renegotiate based on inspection items. Or even worse, they walk away because they found something better and the seller has to start over again.
Though we haven’t seen the kind of crazy bidding wars that some areas of the country are experiencing, we definitely have multiple offer situations, especially for a property that is priced right or something in an area with really low inventory.
So, how do you prepare if your dream property is in one of those areas of scarcity?
- Have your finances lined up and ready to go. If you only do one thing, do this. Cash is always king, especially with new federal regulations and over half of Park City’s home buyers are paying cash. If you don’t have a bank stuffed full of cash, it is even more important to be qualified with a lender prior to making an offer.
- If you need a lender, it is probably best to go local. Just because you found that great rate online, doesn’t mean they can close it. You might be OK with a single family home, but here in Park City for a condo-hotel or something similar, forget it. Local lenders close deals.
- Be ready to move right away. If something great comes across the MLS, put it under contract right away. The real estate purchase contract in Utah allows a buyer to pull out for any reason during the due diligence period, so better safe than sorry. The reality of the market these days is that sellers often have to go under contract two to three times in order to close because buyers are tying up houses just in case. The upside of this is that if you miss that great house, stay tuned, because it might be back.
- Don’t try to go in too low. Making a low ball offer when a home has only been on the market a few days is insulting to a seller and they are less likely to take you seriously. If it has been on the market more than 30 days, that usually means it wasn’t priced right to begin with and you will have a lot more leniency to make a case for a lower price. If you do go in low, make sure your agent has the comparables all lined up and a great cover letter, with the stats, to show the reasoning.
- Get rid of as many contingencies as possible. If you are paying cash or putting a substantial amount of money down, the appraisal might not be that important. At the end of the day, a house is worth what a buyer is willing to pay and a seller is willing to sell for. You might be paying 20K more than the last buyer, but you could be paying 20K less than the next. Removing a loan contingency is unwise unless you feel really confident you are going to get your loan, but it will make a seller a whole lot more confident about your offer.
- Put a large amount of earnest money down. Your earnest money is refundable during the due diligence period, but a big fat chunk of earnest money shows you mean business and can really sway a seller.
- Have a story. A few years back I was a buyer’s agent in a multiple offer situation. We knew the other buyer had deeper pockets, but we also knew that the sellers had been in their home a long time and loved it. My clients were planning on living in the home full-time and they had kids. The other buyers were planning on using it as a second home. I wrote a letter telling the sellers about the family, how much they loved the house and how they were looking forward to raising their family there. The sellers took our lower offer with a loan contingency over the cash and higher priced offer of the other buyers. It won’t always work, but it can’t hurt to try! *Agents must be aware of State Laws. Some states frown upon this as it can be discriminatory, so you must consult with your agent.
- Be patient. It may sound corny, but I’ve been in real estate for almost twenty years. Very rarely have I ever had someone lose a house who didn’t find something that they liked better later on. I hate to say “if it was meant to be…” but sometimes that is the case. You may lose that place to a higher bidder, but something else will come along, and if you use the tips above, you’ll be ready.