Multiple offers exist regardless of the market, but when there is a shortage of homes for sale they are even more common… and when the property is exceptional in some way the competition can become increasingly intense. I had a client submit an offer on a property that had multiple offers last weekend and the listing agent generously shared the following information about the offers they received.
It gives insight into factors that go into making an offer that is in competition with other offers in our current 2024 real estate market… that in reality is not that different from other years following the pandemic in 2020.
They had 37 showings in 2 days and 2 open houses. They received a total of 18 offers… but only one lucky buyer.
- 8 offers included an escalation clause (offering $x over other highest bid)
- 5 offers were $50k or more over list price
- 15 offers used conventional financing
- 1 offer used VA financing
- 2 offers were all cash
- 7 offers included an appraisal gap guarantee (paying the difference if the appraisal comes in lower than sale price)
- 6 offers waived inspection
- 4 offers included some inspection assurance
The situation in 2024 is similar to what I wrote below about multiple offers in 2021… the same principles apply, although the lack of Covid restrictions make it somewhat easier…
Everyone I talk to who is involved in buying or selling homes talks about how crazy the market is this year! Inventory is the lowest in 20 years and with most showing appointments not overlapping, even getting in to see a property when it is newly listed for sale can be a feat.
The StarTribune had an article about it recently that showed a long line of people lined up to get in to see a new listing. I actually showed that house to a client, but we came after the initial day it was open so just walked in at our appointed time. It’s nice that most properties are now listed as coming soon first so you can schedule a showing in advance for when it becomes active for showings. They also often have an offer deadline so at least timing is more manageable and you don’t have to scramble to get your offer in as soon as you see it for fear of missing out.
This particular listing was in a demand location, in great condition, at a demand price point… and allowed multiple showings to happen at the same time, something which hasn’t been happening this past year due to Covid restrictions. Seeing the people lined up to see it highlights the fierce competition in today’s market… but although it can be frustrating, securing a home isn’t a hopeless proposition.
Here are some tactics being used to secure the winning bid. Note that these tactics aren’t necessarily recommended and some are risky choices, but nevertheless ones that some buyers are considering and using when competing with 10, 15, 20 and even more offers!
- Financing
- Cash is king if that is an option, you can finance after you buy
- Work with a respected mortgage company, perhaps with a $10k closing guarantee
- Offer more earnest money than the typical 1-2% of purchase price
- Make your earnest money nonrefundable if financing falls through or agreement is cancelled for any reason, even inspection
- 20% or more down gives you an edge if that is a possibility
- Sellers get full payment, regardless of your down payment
- What concerns sellers is whether you will make it to closing if something comes up in appraisal, inspection, etc.
- Appraisal guarantee
- Guarantee you will not back out of the transaction if appraised value comes in lower than sale price
- If appraisal comes in low, guarantee you will cover any difference between appraisal and sale price
- Offer to pay $X of the difference between sale price and appraised value if appraisal comes in low
- Don’t ask seller to contribute to buyer closing costs
- Offer to contribute to seller closing costs
- Inspection
- Short inspection period
- Waive inspection, or at least parts of it like radon, sewer line, fireplace
- Walk-through consultation when you view the home instead of full inspection (can have full inspection for your information after closing)
- Have inspection, but informational only and agreement is not contingent upon inspection
- Have inspection, but only pass/fail… will not ask seller to make any repairs, or put a $ limit on repairs
- Some buyers are even making offers to buy ‘AS IS’, sight unseen
- Closing date
- Seller’s preferred closing date
- Flexibility
- Opportunity for sellers to close and rent back, i.e. in the case of new construction or finding a new home
- Offer your highest and best price
- Keep your cool, don’t offer so much that you will regret it
- Make your offer high enough that you won’t regret not having offered more if you lose it and won’t regret having offered as much as you did if yours is the winning bid
- Factor in ongoing utility and maintenance costs
- If the property is in need of updates, ask yourself if the property will be what you want after making the updates
- 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
- Think about searching 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
- Plan on being one of the first to visit a property if it is a strong contender
- If it is a property that you really want, submit a strong offer right away rather than waiting for a call for highest and best later… but don’t give up if you can’t get in right away… sometimes the last offers are the strongest and the winners
- Don’t waste your time submitting an offer on a property you don’t really want
- Make a personal connection in your offer, most offers today include a personal letter from the buyer (UPDATE: in 2024 many listings specifically exclude personal letters to avoid discrimination… talk to the listing agent)
- Have your agent contact the listing agent to confirm they have received your offer and establish a connection, keep tabs on offer status, etc
- Have your lender call the listing agent to assure them the transaction will be smooth
- Make your offer as clean and complete as possible
- Include lender pre-approval letter or verification of funds if paying cash
- Make it non-contingent upon the sale or closing of another property if possible
- Include seller disclosures and arbitration disclosure with your offer
- Make it easy for sellers to just sign and accept, with no loose ends to tie up
Before submitting your offer take a deep breath, relax, and ask yourself how you would feel if your offer is accepted… happy? anxious? panicked? Also ask how you would feel if your offer is rejected… devastated? relieved? Sometimes this answer is even more telling… your answers could be telling you that you haven’t found the right home for you yet. I see it happen over and over again… when things are right, everything seems to fall into place.
Sharlene Hensrud, RE/MAX Results – shensrud@homesmsp.com
