06.30.06
Winning “The One” in a Multiple Offer Situation
Although the market has seen some changes in recent months, it is still common to go up against other Buyers if you are looking at homes priced under $200,000 (or homes that are extremely competitively priced). If you feel that you might face a multiple-offer situation, here are some tips that can make your offer more attractive. After all, the goal is to walk away with the house you WANT, not a house you are settling for.
Understand Market Value
Most of the time, Sellers know what their house will “fetch” in their current marketplace. If their representation has proved to them that they’re pricing their home at market value, then low-ball offers have the potential to offend. This is why it is imperative for a Buyer to understand how their offer looks in respect to the current market.
In some situations, it is best to offer full price for a home. For instance, if the Buyer is requesting terms that might make the sale more difficult for the Seller (asking for closing costs, a quick close date, etc.) then a full-priced offer might help them close the deal.
On the other hand, if a home is priced high and the comparable sales prove this, then a careful approach must be applied. Through negotiations, you may be able to figure out if the Seller priced high for “wiggle room” or if they over-priced because they have a false impression of market value. The first scenario is much easier to approach, but an experienced Buyer’s Agent should help you with either.
A well-informed Buyer is a comfortable Buyer. If Buyers understand the market, then they are less likely to experience buyer’s remorse after the purchase. And who wants to regret one of the biggest purchases they’ve ever made?
Be Conscious of the Seller’s Net
Before submitting an offer, it is sometimes helpful for a Buyer to put himself in the shoes of the Seller. Doing so means they can anticipate different reactions that may be encountered. Negotiating the offer is a little like playing chess. If a Buyer feels that his offer might be met with some resistance, then he needs to be several moves ahead of the Seller.
Part of preparing oneself for a Seller’s reaction is to look at the impact on the bottom line. A Seller might not mind if a Buyer asks for some closing costs, but if the Buyer discounts the price and asks for closing costs, their offer might be immediately declined. Public records can provide a probable loan amount that the Seller must payoff in the sale. A Buyer’s Agent can utilize this information to make an informed estimate of the Seller’s Net.
Investigate Seller Preferences
A little pre-offer “fishing” might be in order if a Buyer has some flexibility in terms. At this point, the Buyer’s Agent will feel out the other party to see what is most important to them. Can the Buyer offer a more attractive possession date to the Seller in return for a discounted purchase? Can the Buyer purchase the house with different financing terms in return for some personal property inclusions? Everything in the transaction is negotiable, so Buyers should be sure to keep their eyes open for less obvious opportunities.
Submit a Pre-Approval Letter and Earnest Money
Buyers can strengthen their offer position if they deliver a full earnest money check with their offer. Earnest money is a good faith deposit that serves as a testament to the Seller of the Buyers’ seriousness. In Colorado Springs, earnest money is traditionally about one percent of the listing price. If a Buyer is interested in presenting their best offer, it’s a good idea to include a full earnest money check. This money can either be applied toward the Buyers’ transaction expenses and/or refunded at the time of closing. Should the Buyer default on the offer, the Seller is entitled to keep the deposit.
Along with the earnest money check, it is a very good idea to deliver a pre-approval or pre-qualification letter with the offer. This letter shows the Seller that the Buyers have been talking with a lender about the purchase. When this letter is delivered, the Seller can assume that the Buyers have delivered relevant financial information to a lender so the lender can form an opinion about the Buyers’ ability to purchase. The letter is no guaranty, but it is better than an offer with no letter at all.
