I hear this all the time from home buyers, especially first-time homebuyers. I am tired of losing a home in multiple offers. With buyer demand, low interest rates and inventory shortages, multiple offers have been a standard in the home buying game, especially in competitive marketplaces and in the first-time buyer more affordable homes category of the market.
Home buyers never win in a multiple offer or bidding war. You don’t know what the other buyers are doing, what their financing is, how many of them are there. It can get very discouraging for home buyers. But, if you want a home and are in it to win it, you can’t be discouraged. You just need a strategy.
Timing is everything. Home buying in a competitive environment is no exception. The cream of the crop homes don’t last long. Beating other offers to the punch could make the difference between a sole negotiation with you and the seller and a multiple offer, so you need to know what is out there and go see it right away. Get into the home right away, even if it is inconvenient, do it. Keep abreast of the market by having your Realtor send you updates on the multiple listing service MLS 2x per day, morning and afternoon, that way you have the most accurate and updated listings available.
And you need to be ready to make a quick decision. Be prepared with your preapproval letter ready. Have all the decision makers attend the first showing. Waiting for your parents to come even the next day and you could be behind the eight ball. While it is important to make a wise unhasty and considered decision, you need to know your marketplace, do your homework and consult your Realtor expert so you know when the right thing comes along.
Don’t submit a low ball offer. That is the first way to lose a home to multiple offers. If you are offering on a fast-moving in-demand home, don’t try to negotiate too much and go really low. Home sellers can consider other offers up until you have a signed (not verbal) contract. If you low ball to try to get the price down, you will lose the home – guaranteed. If another offer comes in, you will definitely pay more to get the price. In a multiple offer, the list price usually becomes the rule, so you sometimes need to get right on it, close to it or over it to win the house.
Again, timing is the biggest factor. Homebuyers always need to consider the market, but not over consider. Remember, if you are getting a loan, and most people are, the home’s value will need to appraise. As a homebuyer, you can never overpay for a home. If you think the price is too high, much better to have no competition in negotiating after an appraisal than keep missing out. Yes, homebuyers do need to pay for the appraisal, so there is some chance of loss, but most times sellers will negotiate once they have a buyer. If you are not sure, have your attorney extend the inspection period and do the appraisal right away, then you can reduce potential risks and losses.
Other terms of the purchase can also be a way to win in a multiple offer. Cash maybe king, but the price is the main consideration to most home sellers. The only way to beat a cash offer is to outbid them. But if you are a cash offer or put more money down, that can be appealing to a seller. Conventional financing is usually more appealing than FHA financing.
Home seller concessions like closing costs, surveys, termite inspections, home warranties and percentage of tax proration can be another way you can beat out the competition. Down payment assistance or relative gifts can be one option other than seller paid closing costs. You can get your own termite inspection, survey and home warranty or do without them. Most financing options no longer require termite inspections and survey. Established homes with obvious boundaries do not necessarily need a survey. And unless your inspection reveals an potential issue with termites, you may not need. VA loans still however need a termite inspection, but it can be provided by the buyer.
Tax prorations are usually a small consideration, but combined with others above, it can win. Depending on the current exemptions, assessment and tax increases and since your lender escrows your taxes at closing and each month, you may not ever have a dime out of your pocket for a tax proration at 100% vs. 5 or 10% over the last tax bill.
Offering to buy the home “as is”. You should always still have an inspection and you still have the inspection contingency in place in a contract, so if you say you will purchase as is and there are deal breakers at the inspection, you can always renegotiate. With other buyers moving onto other deals by then, you may be on your own. You shouldn’t go into the deal with this plan to about face on this term, but you still have options.
There are always pitfalls with the appraisal or as is back up plan though. Backup offers could be in place, so the home seller may just go back to that, but other buyers may not wait around and move onto other homes.
Other terms like favorable closing dates or post-closing possession may suit the home sellers needs and favor your offer.
And if you are tired of the multiple offer game and don’t want to play anymore, there are other options. Very few times does a diamond in the rough have multiple offers. Could be the home a little old lady lives in that is in good condition, but is not updated, could be a foreclosure home. You can get a rehab loan to fix up the home the way you want. You still get your dream home and often a better price and less frustration.