You have likely heard that the market has slowed down this year… but that doesn’t mean that multiple offers have stopped. In fact, there was a higher percentage of multiple offers this year than last year at this time.
If you are a buyer, don’t assume yours will be the only offer on the table. My experience this year has been that instead of competing with 13 offers you may only be competing with 3… but that competition can still be strong.
Key points to keep in mind for multiple offers compared to the last few years…
- Solid financing and substantial earnest money are always essential to demonstrate you are serious about the property and the seller doesn’t have to worry you won’t make it to closing… there are more cash offers than you might expect
- Match closing date to sellers needs
- PRICE – average sale price is still greater than list price, and sale price is a key point of your offer
- List-to-sale prices of properties that have been selling around the property can give you an idea of how list prices compare to sale prices in this market area
- Don’t offer so much that you will regret it if you win, but it is still true that the winning offer in multiple bids may be higher than you expect
- Escalation clauses (offering $x over other highest bid) are still fairly commonplace, but not all agents/sellers will respond to them
- If you really want a property, come in strong from the beginning, sometimes sellers accept strong offers without calling for ‘highest and best’
- INSPECTION – it seemed like most properties sold without an inspection the last couple years, but not so much this year… more sellers are recognizing the value of an inspection in protecting both the buyer and seller by establishing a baseline
- A walkthrough consultation with an inspector to look for major concerns can be an option to allow you to make your offer not subject to inspection
- If you have an inspection, make the inspection period as short as possible
- APPRAISAL – sale prices aren’t as crazy over list price as they were, but sellers still can be concerned about making it through the appraisal process
- Although it was fairly standard to offer some sort of appraisal gap coverage the last few years, such as a set amount of $5k, $10k, $20k, $30k to bridge the gap if the appraisal comes in lower than sale price, my recent experience has been that full appraisal gap coverage is what is expected when addressing appraisal values
- With offers not as crazy above list price as they were, appraisals are not as big a concern as they were the last couple years
- Although appraisal gap is a concern for sellers, I haven’t seen many issues but I know they exist… so many offers above list price help support higher valuations
- An example of full appraisal gap coverage: if sale price is $500,000 and appraised value comes in at $475,000 you would need to bring an additional $25,000 to closing… but your loan would be based on a value of $475,000 instead of $500,000 so you would bring a lower down payment
- LOVE LETTERS – letters from the buyers to the sellers conveying how much they love the property have generated much controversy
- Sellers often like knowing something about the buyers to help them make their decision
- But there is concern this can also lead to conscious or unconscious prejudice and more and more sellers request that love letters not be included
- Be sensitive to direction from the listing agent about submitting love letters
Be careful not to get so caught up in buying frenzy that you make an offer you will regret. Ask yourself how you would feel if you offer is accepted. If you feel a pit in your stomach you may be making an offer that isn’t right for you… it may not even be the right house. Don’t panic… the right home for you will come along. I see it happen over and over again… when it is right, everything falls into place. Just relax and go with the flow, as the old saying goes.
Sharlene Hensrud, RE/MAX Results – shensrud@homesmsp.com
