We have been looking at homes for a few months and made an offer. There are six offers on this home and our Realtor® told us we have to increase our offered price. The seller’s Realtor® also said he can’t disclose how much higher we need to go. I don’t want to lose the home but don’t want to pay more than I have to. Any advice you can offer when competing with multiple offers is appreciated, thanks.
Dear 1st Timer,
We are in a seller’s market. Most homes are selling quickly, often in multiple offer situations and many for over asking price. There continues to be a shortage of available homes for sale. There are several strategies when competing with multiple offers.
When representing a buyer, I often find that if I ask the seller’s Realtor® (listing agent) the right questions, I can get some much needed background information.
1) I can learn how many offers there are.
2) How many are over asking price, if any are cash, or contingent upon the sale of another home, etc.
I need to learn when the seller will be looking at offers and whether he will be countering all of them or just the best ones for the final “highest and best” offer. Most sellers are countering with final and best price. Once I have these answers, my client and I will discuss comparables (comps). Then we need to decide how much the home is worth to them. Is this the perfect home with the ideal floorplan? Or are they settling?
Once we decide on our final offered price, we can discuss which other terms might entice the seller to accept our offer. Is the seller desirous of a long escrow? Does the seller need some time after closing to move out? Perhaps the seller wishes a rent back? There are other tactics for you to discuss with your Realtor® but these can have serious ramifications:
1) Waiving your appraisal contingency. Keep in mind that lenders loan based on the lower of the purchase price or appraised value. An 80% loan to the borrower is based on the lowest value. If you waive your appraisal contingency you may need to increase your down payment.
2) Waiving your loan contingency (these can be helpful when competing with cash buyers). If you wave this contingency you need to discuss this carefully with a reputable lender (one with years of experience).