MUltiple Offers Are Back!
Perhaps the biggest story of the spring 2012 housing market is the return
of multiple offers. It's not the frenzy of 2005-2007, but the open houses of properly priced properties are mobbed lately; many are receiving multiple offers after the first week on the market; some are selling over the asking price. What should you
do if you find yourself in a bidding war? Here are a few tips: Sellers:
• The highest offer isn't always the best offer. After years of falling home prices, it's tempting to accept the
highest bid straight off. But it's as critical as ever to carefully consider the buyers' ability to close, as well. While sales volumes are up, lenders are as fickle as ever as to whom they will lend. Weigh factors such as finance contingencies,
ability to close without having to sell first, earnest money and closing date. At the end of the day, choosing the right buyer is
just as important as choosing the right price.
• Move quickly. While the market is heating up, three months of heat does not a sellers market make. Respond to offers quickly, and once the terms are to
your liking, get a contract signed ASAP. The longer a negotiation drags
on, the more tenuous it becomes.
• Maintain your objectives. If your target price was "X",
don't all of a sudden set a new target of "X plus Y". "X plus Y" has a
nasty habit of turning into "X minus Y". Stick to your game plan, and be
happy when it succeeds.
• Foster a feeling of equity in negotiations. A person is likely
to walk away from a negotiation when they feel they've lost control.
This is important to remember, even in multiple-offer situations. While
you may have the leverage, it's important to keep a buyer engaged and
avoid ultimatums.
Buyers:
• Start with your best offer. If you know you're going into a multiple bid scenario, write your best offer from the start.
• Earnest money can make a difference. Increase your earnest money deposit to show the seller you are serious about closing and will not back out of the transaction.
• Pre-approval is a must. A mortgage pre-approval (or proof of funds for cash buyers) is a necessity. Shopping for a home without pre-approval is an exercise in futility in today's market - multiple offers or not.
• Find out what's important to the seller. Ask your broker to determine the seller's hot buttons in the transaction. Maybe they're willing to accept a slightly lower price for a fast closing or an "as-is" contract. If they are faced with a potential lapse in time between closing on their current home and closing on a new one, perhaps they prefer to close and then lease the property back from you during that lapse, rather than having to find temporary housing.
• Waive contingencies. Depending on the condition of the home, your finances and/or your level of job security and your comfort with DIY projects, it may make sense to waive certain contingencies, such as a home inspection or mortgage financing. Discuss this strategy with your broker at the outset, discuss and weigh your options, and explore your comfort level in this regard.
Preparing for multiple-offer situations ahead of time can make the process much less stressful and give you the edge you need to succeed.
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