I wrote my first post about multiple offers back in 2009, but I expect 2021 will become known as the year of the bidding wars. Although multiple offers happen in all markets, more than 20 offers on a single property is more a 2021 phenomenon. With multiple offers becoming the norm in all price ranges, you must still pay attention to seller’s desired closing date and your financing, but there are three key factors that often make the difference in winning the bid.
PRICE
- Keep your cool, don’t offer so much that you will regret it if you win, but be aware that the winning bid may be higher than you expected
- Check list-to-sale prices of nearby properties
- It is not unusual for winning bids in the metro to sell for more than 10%… or even 15-20% over list price
- Search for homes 10%-15% below your maximum price to give yourself room to submit a winning bid if there is high competition
- Escalation clauses (offering $x over other highest bid) have become popular, but not all agents/sellers will respond to them and they can be difficult to manage fairly if there are many on the same property
- They don’t show strong commitment to the property
- Come in strong from the get-go if this is the property you want to win and say you will welcome a counter offer
INSPECTION
- More than half of the offers I see are waiving inspection
- Some are making the inspection informational only, but that can also make sellers nervous if comparing it to no inspection at all
- Personally, I feel that an inspection protects both buyer and seller by establishing a baseline for minimizing future complaints
- If you are making your offer subject to inspection, make the inspection period short
- Some are doing a walkthrough consultation with an inspector prior to submitting an offer, but this can be hard to orchestrate with the short showing appointments now prevalent
APPRAISAL
- It is becoming standard to offer some sort of appraisal guarantee, such as guaranteeing to pay $5k, $10k, $20k, $30k, etc to bridge the gap if the appraisal comes in lower than sale price
- Make your gap guarantee commensurate with the amount your offer is over list price ($50k+ over list price is not uncommon)
- Full appraisal guarantee to bridge the full cost of any gap between sale price and appraised value is of course preferred
- Although appraisal is a concern for sellers, I haven’t seen or heard of many issues… so many offers above list price help support higher valuations
Finally, be aware that buying a home is different from most other financial decisions. Buying a home impacts real people with real life stories. Sometimes it is a purely financial decision for sellers… but longtime owners especially may have an emotional attachment to their property. They aren’t merely selling a piece of real estate, they are selling their home full of memories that they want to pass on to another homeowner who will love it as they have. This is where a LOVE LETTER can come into play. Some agents may ask you to remove a love letter, but in some cases it can make the difference in becoming the chosen buyer. Have your agent talk to the listing agent… sometimes that can make all the difference and overcome other shortcomings in your offer.
Sharlene Hensrud, RE/MAX Results – shensrud@homesmsp.com
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