Multiple Offers
The bane of home buyers and most real estate agents is writing an offer on a home amidst multiple offers. Prices and stress levels run high in this marketplace situation. But it isn’t always bad news. Sometimes you can win by simply making a clean, full-price offer.
The likelihood that you’ll face a multiple-offer situation depends largely on the popularity of the type of property you are seeking. Precursors for multiple offers include high demand for a style of home, neighborhood location, lack of market inventory or all of the above!
The multiple offer situations can happen at the most unexpected times. Buyer preparation and a skilled agent with experience in multiple offer scenarios can help you win the home of your choice regardless of the competition. Many agents know when a certain type of home might receive multiple offers and will prepare you in advance.
Upon previewing sale properties, you likely will tour many homes. The home that rises above as the best property because of location, price, style, etc., will spark your interest. If your search has taken a long time to find something suitable, you may want to act fast because you don’t know when another like-property will be available. In this type of environment, you quickly may discover that other home buyers are just like you, and just as motivated.
Multiple offers demand that buyers make their “best offer.” Best offer usually means the asking price of the property and possibly much more. If more than one buyer is more-than-likely offering above asking price, your only option to stay in the running is to use an “escalator clause” when writing your offer. In that scenario, you have to quickly determine how much you are willing to pay.
The escalator clause let you “proxy bid,” similar to auctions on Ebay. You will make an offer and are willing to beat competing offers by an increment increase (i.e. $1,000) up to a top price, determined by you. Some escalator clauses have no cap price, with the good faith intent to purchase, but are subject to final buyer acceptance and acknowledgement within five calendar days.
Buyers should be well prepared to deliver a pre-approval letter from their lender at the time of writing the offer, or bank verification of cash-to-close if the purchase is cash. You can further strengthen the offer by waiving the inspection contingency, offering to purchase as-is or even waiving the loan contingency or five-day right-to-rescind-offer clause.
With competing buyers on your heels, there may be little you can ask for in the way of buyer contingencies in your offer, such as repairs or other costs that you might otherwise expect the seller to pay.
Don’t necessarily assume that you’ll pay “too much” by bidding up the price of a home. Buyers often consider that the list price of a home as “what the market will bear.” Instead, the closing or sales price is what determines market pricing. The home selling market can fluctuate as much as 10 percent in one season (3-6 months), so don’t let list prices fool your home value train of thought! Some agents even list homes at a low price and fuel the multiple offer frenzy. Having to offer above the list price for a property may be a case of increased home equity right before your eyes—a common occurrence in recent years with Portland’s rising home prices.
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