How To Make A Bid On A Home- In a MultiOffer Situation
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If you’re trying to buy a house right now, you are quite aware it’s slim pickings out there. And when you do find one you love, you most likely will be competing with multiple offers.
In this hot sellers market, chances are it may take you several attempts before you are the winning bid on a home.
Today, I’m going to give you the top 5 things you and your Realtor should do to have the very best chance of beating out your competition and be the winning bidder for your ideal home.
Before we get started today, I have to warn you:
Some of the things buyers are having to do in this crazy market to be the winning bid may not settle well with some of you.
Afterall, we all want to feel we’re getting a “deal” ..right?
I’m not saying you won’t.. But as a buyer competing in a multi-offer situation, you must have a ‘winners’ mindset.
Obviously, Most Homeowners who are selling want to make as much money as possible.
It’s nuts out there right now, and many buyers finding out the hard way that there are buyers who will really go the extra mile for homes they love.
You need to be armed with the best strategies when your Realtor designs your initial offer.
That means you have to forget about making an initial offer below list price.
As a buyer wanting to win in this kind of market, it’s something you must to come to grips with.
When deciding on what amount to offer, make sure you are comfortable with the possibility of the home NOT appraising for the contractual purchase price.
If you’re financing your new home, That means you may have to come up with additional cash at closing to make up the difference.
Your Realtor might want to put in language in your contract that translates to “Subject to the home appraising for purchase price of higher”
This totally defeats the purpose, and will decrease your odds of being the winning bidder.
So be very calculated when making your initial purchase price offer.
This should be your Risk, Not the sellers.
It’s also important to show the seller you are a real person. Any purchase offer must include a personal, heartfelt letter addressed to the sellers by name. This attached letter needs to be short and well written:
Tell them a little about yourself and your family,
name a few features of the home you fell in love with, and end the letter with telling them you’d be honored to care for their home like they obvious have done through the years.
Of course put all of this into your own words, but you get the idea.
Getting back to pricing strategies ..
Want to light up a sellers eyes? Put Cash in front of them!
An all cash offer has significant advantages. It knocks out any financing offers (provider the bid is high enough), eliminates the need for an appraisal and other standard contingencies and can close much quicker than someone who is having to apply for a loan.
Sellers love Cash offers for another big reason too:
With the complexity of obtaining a mortgage loan, there are things that could go wrong.
A cash offer eliminates the possibility of being 3 weeks into the transaction, their home off the market all this time only to learn the buyers lender has to deny the loan for some reason.
For more details about what could go wrong when financing your new home, you’ll want to check out this video where I talk about the things you should do to avoid these potential things from happening. You’ll find the link below in the description.
If an all cash offer is not possible, and you have to finance your purchase, show as much cash as possible.
This can be done a couple of different ways:
One way is to forgo the standard 1% earnest money deposit. An earnest money deposit is the amount you deposit into escrow as ‘good faith’ of your intentions. This amount is deducted from your purchase price at closing.
The more you show as your earnest money deposit, the louder you are saying to the seller “ I’m not playing, I am a serious buyer who wants to purchase your property!”
Another way you can show more cash when financing is the amount of your down payment.
For example: your loan approval may be for a standard 3.5% down FHA loan. If you have additional cash to put down, reflect this on your purchase contract. This shows the seller you are financially stronger than the minimum requires.
Again making the statement to the seller that you are putting your best foot forward and not afraid to show it.
And now for the most powerful thing you can do to show the seller your intent:
Attach an escalation clause to your purchase offer!
In short, an escalation clause is telling the seller you are willing to increase your offer by (X) amount over the highest bidder.
Of course there are safeguards that can be put into place like amount caps and the offered increase amounts.
When an escalation clause is used correctly, it can be an extremely powerful tool to exponentially increase your odds of being the winning bidder.
Unfortunately, lots of buyers agents are not familiar with exactly how to use an escalation clause, and sadly, most sellers agents are not familiar with the way they work either..
So yep, you guess it.. Human nature says if you don’t understand something it is easily dismissed as too complicated.
If you follow my channel, you’ve heard me say this many times:
Knowledge is Power! Your Realtor should know how to leverage any and all tools to convey your best offer.
There are two parts to your offer: Price and Terms
Lets’ talk about what you can do to strengthen the ‘terms’ portion of your offer.
Firstly, your Realtor needs to find out if any of time elements of the offer is particularly important to the seller.
For example, if the the seller needs a tight closing date..Give it to them! If your are financing, Just make sure you check with your lender first before offering a fast closing date.
If you’ve been aggressive in the preparation stage of your home buying journey, your lender most likely can give you a tighter closing date.
For more information about how to properly prepare to buy a home, you’ll want to check out this video. You’ll find the link below in the description.
Also, shorten your inspection time. The standard inspection period is 10 days. Cut that by half!
Your Realtor should have several home inspectors on speed dial and have your inspections scheduled the moment your offer is accepted.
Every contract contingency is a potentially road block for the seller. By shortening these time elements, you are showing the seller you are minimizing the ‘nail-biting time’ all sellers dread.
Some Realtors will suggest waiving the home inspection all together.
Never waive your right to a formal home inspection, unless you are 100% confident of the condition of the home.
It can be a little scary when deciding which bidding war strategy is best for you and your family.
Sit down and have an in depth conversation with your Realtor to map out a plan as to how your very best offer can be designed, within your means.
After doing these things with a winners mindset, and you still come in second place for some reason, have your Realtor stay in touch with the sellers agent.
No transaction is guaranteed to close. In the crazy market we’re seeing some unprecedented things happen.
Always be ready to pounce if your realtor gets wind the current offer failed.
I hope you found this video helpful and maybe learned few things. Need a free 15 minute personal consultation with me?, just click the 'BOOK NOW' button to schedule a day and time that works best for you. I’d love to talk to you.