Many of my deals this year and in the past several years have been the result of a multiple offer situation. When a listing is priced right in a competitive market there may be several bids in just that first few days that it hits the market . Therefore, it is important for buyers to be prepared. First, ask your Realtor about market conditions and what to expect. Things like, ‘what are average market times for homes in my pricepoint?’ ‘Should I be prepared to pay list price or higher?’ Setting these expectations for yourself can help so much in the process and give you the confidence needed to move forward on the home you love when you find it. If you land in a multiple offer bid situation here are 3 tips that may help you gain the advantage.
1) Find out what is really important to the Seller.
Many make the mistake of automatically assuming it is price. So often people get bent out of shape later on when a house closes and they find out their offer was higher but they did not win the bid for the home they wanted. But here are a few other factors that might be more important than price to a seller: Closing Date – they may have a very specific time frame for themselves or their family that they need accommodated. Financing – many sellers have been burned before by buyers whose financing fell through, so a cash offer or higher percentage down might be more appealing. Contingencies of any kind- similar to financing, fear of the deal falling through and starting all over can be a big motivator in a seller choosing a different offer. For instance, perhaps the other offer waives their appraisal or inspection contingency. By finding out through the other agent or directly from the seller in a for sale by owner scenario, what aspects of the sale are most important to them, often times you can craft the strongest offer.
2) Be Fast and Be First
When you get a response from the seller during a negotiation don’t take a day to think it over. This is a really easy way when multiple parties are interested to lose out on a home. Remember ‘The early bird gets the worm’ and all other cliches associated with ‘get in gear!’ This is the time to be first if you can and start the tone of all other negotiations. Show you are serious and interested. It’s not like a garage sale where you really want the painting you see but in front of the owner pretend not to be that interested so that you can get a ‘deal’. In multiple offers playing hard to get won’t work. They don’t need to come get you, you’re pursuing the asset they have and remember it’s soon to be one of your biggest and most important assets. If it’s that important don’t play games.
3) Try an Escalation Clause
First, let me say these are permissible and becoming more and more common in IL. In other states you would need to check with your Realtor to find out if you can use one. Here is a sample wording of an escalation clause “Buyer is offering $250,000 OR $2,000 over the next highest bid not to exceed $260,000.” Sometimes these work, sometimes they do not. In many circumstances it can give you that little bit of edge you need since you do not know what others are offering. To ensure honesty, I request that if this clause is put into place that the other offer be shown to the buyer (names blacked out) before all final signatures are applied. Some circumstances where it doesn’t work is if more than one party tries the escalation clause approach or if, as previously mentioned above, price is not the main motivating factor for the sellers. It is a creative strategy though and one that can often times make the difference. Don’t forget to put the ceiling on the price!
While I said 3 tips, I am going to throw in one other bonus tip to try. In wanting to set yourself apart, it might be a good idea to write a short 1-2 paragraph cover letter introducing yourself and explaining why you want to buy the home. This won’t necessarily make an impression on everyone, particularly those just worried about the bottom line, but in some situations where both offers are generally the same, it might be the thing that sets yours apart. Example would be “Dear seller, my name is xyz and my wife and I are expecting our first child. We love your home and the obvious care and work that you have put into it over the years. We very much hope that we can raise our children there and put into it as much love and attention as you have…..” hopefully you get the idea.
I hope these tips help you if you are searching for a home and find yourself in multiple offers! If you are searching on the North Shore or city of Chicago I’d be happy to help you find your next home!