As a seller you love them, as a buyer you dread them: the multiple offer situation. And in March, when the (somewhat) somnolent winter real estate market starts revving back up into high gear with the onset of spring, multiple offers become a more frequent occurrence.
Let the delight or dismay ensue!
From a buyer’s perspective, the obvious issue is that you don’t know what you might be up against when you hear the dread “submit your your best and final offer” phrase. If you don’t know what the other offers are, how are you supposed to know how to beat them? The listing agent can only disclose that there are other offers, but not what’s in those offers (unless specifically directed to do so by the seller — which is rare, but does happen). You have to know how to structure an offer which will be the most appealing.
Obviously, upping your offer amount is the first thing to look at. Offering more than the asking price is very common, especially in our crazy hot Austin real estate market, and something I alert my buyers to the possibility of when I’m certain we are going to be in a multiple offer situation. I have often chosen to go in initially over asking price, as long as I feel that price will be supported by the appraisal.
But one thing to know about multiple offers is that sellers don’t necessarily always go with the highest dollar amount; oftentimes there are other factors which can be more enticing to them. For instance, it can be a quick closing date that wins the day. If a buyer can close in 2 weeks instead of 45 days that can be very appealing to a seller who needs to move in a hurry. Conversely, it can be a buyer who doesn’t need to take possession right away but can allow the seller a leaseback for a certain period after closing while the sellers wait to close on their new home.
When offers received are very similar in price and time needed to close, other things which can tip the scales in your favor are a shorter option period (note: I would never advise NO option period) and/or a higher option fee, a larger earnest money deposit and a greater down payment. These are things which speak to the seriousness of the buyer and to their financial stability, so there appears less risk that the deal will fall apart from financing issues. I would also include in that same category (if it’s feasible) for little to no ask for seller contribution to closing costs, which translates to a higher net for them — because for some sellers it is ONLY about the Benjamins!
Another contributing factor in some seller’s decision-making process is a bit more nebulous: the sentimentality factor. While for some folks it’s just a piece of real estate and doesn’t mean anything to them on a personal level, for many sellers their home carries a lot of emotional weight and they want to know it is going to someone who will love the home and care for it as they did. Many sellers like knowing that, after having raised their own family in a home, the new buyers will be doing the same. They made many fond memories in their home and they want to see that continue with a new family. They want their old home to be appreciated, its history respected.
Knowing this, one of the things I like to include in my offers is the “love letter”, which is just a short paragraph or two about the buyers and their hopes and plans for their life in the new house, what they love about the home and/or the neighborhood — them, their kids and the family pets all get starring roles in the love letter! Nothing schmaltzy, mind you, just something to pluck the heartstrings a bit, or stir up fond memories for the sellers of when they themselves first bought the home. I have seen sellers turn down a higher dollar offer on their home by investors who were planning to flip it and instead sell it to a family for a little less based on their love letter. Never underestimate how much of a role sentimentality can play for some sellers.
My final thought on submitting an offer that stands out and hopefully wins the day is make it clean, fill everything out completely, attach all pertinent documentation (financing agreement, lender’s pre-approval letter or proof of funds letter from bank, and any other addenda needed) and summarize the offer in a cover letter with bullet points showing the specifics so they can quickly get a complete picture of your offer without having to read a dozen pages. And then keep your fingers crossed! 🙂