Multiple offers exist regardless of market conditions, but the percentage of listings that close with multiple offers varies. The chart below shows the percent of ‘trackable’ closed listings that had multiple offers (listings that indicated ‘multiple’ offers in the listing). I know there are more, but I don’t have a way of tracking them. At least this gives a baseline of multiple offer activity.
As you can see in the chart above, multiple offers peaked in 2021-22-23. They are still happening at a pace higher than before the pandemic, but slowed down a bit the last couple years… but this year is still as strong as last year. The driving force has been a shortage of homes for sale compared to the number of buyers ready to buy… hence competition for available homes.
The red line in the graph below shows a market balanced between buyers and sellers at about a 6 months supply. June had only a 2.6 month supply (meaning it would take 2.6 months to sell all current inventory if sales continued at the same pace with no new listings added). We have been in a seller’s market since 2012, and while the supply is slowly climbing, it still has a long way to go to get to a balanced market.
If you are buying in a demand neighborhood at a price point under $1 million, there is a good possibility that homes in good condition will sell with multiple offers. Some properties I know that had multiple offers this year had up to 23 offers and sold for up to $95,000 over list price, but more common are fewer than 10 multiple offers, with prices under $30k over list price. Have your Realtor do a search for properties within a half mile of the house on which you are making an offer that have sold within the last 6 months to gain an understanding of activity in that market.
Factors in Securing the Winning Bid
The primary factors in securing the winning bid haven’t changed, but some of the nuances have changed… some tips below.
Price
Offer prices aren’t as crazy as they once were, but high demand properties still command high prices and competition is what keeps the median sale price moving up.
- Look at list-to-sale prices for recent comparable sales to help you decide on offer price
- Consider including an escalation clause (offer $x over other highest bid)
- Ask yourself how you would feel if your offer were accepted
- Asking how you would feel if your offer were rejected could be even more telling (disappointed or relieved?)
- Be careful not to offer so much that you will be unhappily house poor
Appraisal
- Appraisal guarantee isn’t as big a deal as it was a few years ago, but including it can make sellers more comfortable with your offer
- Guarantee you will not back out of the transaction and will bridge the gap between sale price and appraised value if it comes in low
- Offer to pay $x towards any difference between sale price and appraised value
Financing
- Cash is king if that is an option, you can finance after you close
- Work with a respected mortgage company, perhaps one with a $10k closing guarantee
- Offer more earnest money than the standard 1-2% of purchase price
- Make your earnest money nonrefundable if financing falls through or agreement is cancelled for any reason, possibly even inspection
- Include an underwriting deadline
Inspection
Pressure is no longer strong to fully waive inspection, but this is still often a negotiating point.
- Short inspection period
- Waive parts of inspection, such as radon, sewer line, fireplace
- Have inspection, but only pass/fail
- Have inspection, but put a $ limit on repairs… i.e. only ask for repairs on single items over $x
Closing Date
- Use seller’s preferred closing date
- Show flexibility
- Opportunity for sellers to close and rent back, i.e. in the case of new construction or finding a new home
Miscellaneous
- There aren’t as many AS IS offers, sight unseen
- Although some sellers like reading letters from buyers, many of today’s sellers do not want to see them… talk to the listing agent
- Make your offer as clean and complete as possible
- With buyer’s agent commission now part of the purchase agreement, asking for less than typical commission could work in your favor
- Have your lender call the listing agent to assure them the closing will be smooth
If you don’t have the winning offer, don’t despair… it could be you just haven’t found the right home 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
