You found a home you want to buy, and now you are ready to make an offer. Immediately the Seller’s agent informs you that there are multiple buyers interested and that they are expecting multiple offers. It sounds ludicrous after the 5-year market adjustment of the Great Recession, but bidding wars happen in all sorts of markets. In the Mad River Valley real estate market that I call home, they happen practically every day. If your default is to panic, take a step back and breath deeply. The last thing you want to do is over-react to the very ordinary possibility that there are other people interested in the same property you are. There are plenty of innovative ways to “sweeten the deal” without turning a good deal into a bad one.
1. Money talks – If you have cash you should utilize this position to your fullest advantage. Financing contingencies create great uncertainty for Sellers because they control nothing and the outcome is weeks away, by which time the “losers” in a bidding war may well have moved on. If you have the solitary cash offer, you are immediately in first place. Just don’t balance that by making a crappy, low-ball offer.
Alternately, if you don’t have the cash, you can still make an attractive offer with the most favorable terms. This is not the time to strategize with your broker about how “low” the seller might go. With multiple buyers interested there is an excellent chance that the property will garner close to full asking price. As long as you can afford the loan and the market supports the price, this is the time to impress the Seller; match the ask with a full-price offer or better yet offer a few points above the ask. Timing is critical and shooting out of the gate strong can be the game-changer. Amortized over the life of your loan, this step may make the difference and will cost you the equivalent of a night out to dinner once a month.
2. Get PRE-QUALIFIED not pre-approved – a pre-approval letter is simply a letter from a lender that states that you are approved for a loan based on the information that you, the buyer have provided. Honestly, who cares what a buyer TELLS his prospective lender. Pre-approvals are worth no more than the word of the buyer who provided the information.
Pre qualification will require you to pass thorough a thorough credit check and verification of bank statements, employment records and income before you even make the offer. It will show an informed Seller that you are serious and help eliminate much of the uncertainty that comes along with the standard financing contingency and those buyers who have merely been pre-approved. In the truest sense, an offer from a pre qualified buyer is as good as a cash offer. It is a major step toward leveling the playing field, or even tipping it in your favor. It could even position you to make an offer that was not contingent upon financing, however you should consider that financing contingencies also protect against a number of other external factors such as significant interest rate fluctuations brought about by market volatility or even the loss of a job in the weeks prior to closing.
3. Make it personal – I find it amusing when Realtors sterilize transactions by asking their clients to do such things as removing family photos from the walls. Personalizing your offer can make a huge difference, especially in a residential market where Sellers may well be leaving a home they have lived in for 20-30 years. Write them a letter of introduction, thank them for considering your offer and compliment them on the things around the property that are clearly a labor of love (you have the most amazing gardens I have ever seen). Tell them why you love the neighborhood, and how you are really looking forward hearing back from them. Ask them to please reach out if they have any questions whatsoever.
Furthermore, ask their broker if there are any special conditions that the Sellers are looking for in an offer, and do everything you can to accommodate them. For example, they may wish to rent the house back for a few months while they find suitable accommodations, or require the use of the garage to store some of their personal belongings for a month after closing. As long as the attorneys can work out the language so that everyone is satisfied, these are the little things that can make a big difference, and which will have little future impact upon you if the ultimate outcome is landing the home of your dreams.