Buyers and Multiple Offers – What’s Next?
If you have been thinking about buying a home, you’ve probably heard about, or even spoken with a friend or colleague who has been in a multiple offer situation on the home they were trying to purchase. The first thought many buyers have is “I don’t want to get in any bidding war!” and just walk away. But with the limited inventory we are faced with, you may need to suit up and go to a multiple offer situation. There is no rule book when it comes to this, and every situation will be different. Let’s talk a bit about 4 scenarios in the multiple offer situation and how it can work in our market.
Notification of Multiple Offers … or Not!
When a Seller does receive multiple offers, they have several options. They can just accept one of the offers that they think is the best, and notify the other buyers their offer was not accepted. Ahhh, but WAS that really the best offer? If the Seller were to choose to notify ALL Buyers that there are multiple offers, and call for “highest and best” they might get a waaaaay better offer than just accepting one of the original ones.
This is where that bidding war comes in. The Buyer (maybe you….) that might have really made the best offer now decides not to place an offer at all. But if you are in a very competitive Seller’s market, you need to be prepared for the multiple offer situation. You can make your best offer, and leave it at that, and know you offered what you could. Or, if it’s really the home of your dreams, then think about what you can do.
Full Price Offer is Not Always The Winner
Sure, if the home is listed for $500,000, you would think your full price offer of $500,000 would be the one they select, right? Well, there is more to an offer than just the Purchase Price. There is closing costs, due diligence, appraisal and financing contingencies, closing date, and possession date. In this competitive market, the chance is pretty good the Seller may even get an offer OVER the asking price. But what about these other terms we just mentioned. The price may not be the end all to the Seller. Maybe a short due diligence period so they know you are ready to move on. (We have seen many Buyers waive this contingency and we strongly advise against it….but that’s for another story) Buyers, with the help of a pre-approval from a lender have been waiving financing contingencies. They are fully approved and just need to have the lender do an appraisal.
And then you could even waive the appraisal. But if something happens and there is a difference between the contract price and the appraisal amount, you will be responsible for that difference. And that difference could be minor or major. (This is where appraisal gaps are put in place as to how this will be handled)
Perhaps the Seller needs to move quickly….or maybe the Seller has NO place to move yet! Your offer might include a longer closing (escrow) period and/or a potential lease-back of the property to help the Seller with their move.
Counteroffers From The Seller …. Not So Fast!
One of the other options available to the Seller besides asking for highest and best, could be to get a Counteroffer from the Seller. This can be very typical when there is just one offer. But if a Seller has two, or more offers, they most likely will not send you a Counteroffer. This is why your agent will help you make the best offer you can make, from the start, so you have the best chance possible.
Time is of the Essence
The market is rough out there…let’s face it. Lots of Buyers (like YOU) and not as many homes to choose from. So the Seller is going to move quickly to make a decision on an offer, or offers. Don’t expect them to wait while you get your pre approval letter done, or your best friend from college to come see the house with you on a second showing….there’s not going to be a second showing. That Seller is going to be making a decision….quickly….to get their home Under Contract.
You need to have done your own due diligence of sorts…be it the school zones, noise, traffic, size of lot…whatever your concerns may be over and above an inspection and financing….You need to be ready to POUNCE if you like the house. So, if schools are important to you, make sure check them out and that you are only looking at homes in the school district where you want to live.
I’m here to tell you…. multiple offers is stressful. On everyone. The Seller needs to accept the right offer so their home is not off the market, and then the contract “falls out” and you are back to Square One! But, as a Buyer, if you have listened to and worked with your REALTOR®, we can try to avoid some of these challenges. That’s not to say we will win the first contract we write, but we know what we need to do!