How to Win a Multiple Offer Situation
Hi friends! It’s 8PM on Wednesday night and I’m writing to you after a very long weekend. Law of attraction IS real! Suddenly, I’m in the busiest season of my career to date. This is what I’ve spent the last 3 years working for. Getting to this point has taken lots of long days, working for free, missing sleep, some tears and a whole lot of hustle.
This past Friday I get a text from my team lead asking if I could show homes this coming weekend. We got a sign call on a listing in Seabrook and she had convinced them to see properties exclusively with us. I’ll be honest, it crossed my mind to say no because I already had such a busy weekend ahead of me... I was also prepping for a listing appointment on Saturday in Texas City at 1 and a different set of buyers to show that morning in the Memorial area of Houston. Not to mention it was my dad’s birthday and I wanted to go spend some time with him and my brother in Santa Fe. But what's a little bit busier? So I scheduled showings for 5 properties in Clear Lake and League City and texted my new clients that I would see them Sunday!
Fast forward to Sunday, showing #1 looked nothing like the photos and they decided to pass (super common). Did you know you can be catfished by the MLS, too? Showing #2 was overpriced which I knew from researching the property extensively before the showings, and after taking a look in person it wasn’t worth it to my clients. When we got to the 3rd showing, they fell in love almost instantly. As a buyer's agent, that’s one of the most exciting things to witness.
After wrapping up our showings, and only a few minutes of deliberation, they decided they wanted to submit an offer on the third home we saw, just as anticipated! Since I had already done my research beforehand, I knew that this home was fresh on the market with multiple offers already, which meant we needed to be competitive. I also knew that this home was priced appropriately and that we had room to offer over asking price by doing a CMA. FYI - A CMA or comparative market analysis is a report that uses similar properties in size and proximity to asses the market value of a subject property. In multiple o
ffer situations, offering over the seller's list price isn't the only thing you can (and should) do to create a winning offer. There are a number of terms in a contract that can create a competitive offer, which we will define in this situation as an offer most appealing to the seller, who has multiple to choose from. As someone who has never lost a multiple offer situation, I'm going to share some of them with you right here, right now.
Price - But this is the obvious one, right? You’ll want your agent to run comps (that CMA report we talked about earlier) to determine how much above list price (if any) you should offer and still ensure the home will appraise.
Earnest money amount - Earnest money is considered a sort of “good faith deposit” that is usually 1% of the purchase price. You deposit this with the title company and it is protected by your option period which will we talk about soon. You can increase this amount to 2 or 3% to show the seller you are a strong and serious buyer.
Option period length and fee - In Texas, an option period is the first couple of days in the contract where you, as the buyer, can back out for any reason. It’s unrestricted. You can do an inspection and decide you are no longer comfortable purchasing that home, you can find a different home you like more, you can even just change your mind and decide not to buy a home at all. The only penalty is losing your option fee as it goes to the seller for taking their home off the market for you. Here in Houston, standard option period for the average priced home is 10 days for an option fee of $150 or so. In a multiple offer situation, shortening your unrestricted right to terminate, lets say from 10 days to 7 or even 5, shortens the time you can back out for any reason making the deal more appealing to the seller. Increasing your option fee is obviously more beneficial to the seller as it’s the money they get to keep if you do back out. So you can make a big impact by changing your option period length and fee.
Home warranty amount - It’s common to write a Home Warranty into the contract that requests the seller to pay for your first year of this policy. These policies range from $300-750 or so. This option makes a smaller impact on the sellers net, but an impact nonetheless.
Type of financing - Cash is usually king, of course, because it doesn’t require the risk of an appraisal or come with the possibility that the lender can’t fully qualify the buyer and make it to the closing table. If you are financing, a conventional loan is seen by most agents as the “strongest” form of financing as you can put over 20% down. When you put 20% or more down on a home, you can usually ask for the lender to waive the appraisal and compete with cash offers from that perspective. While FHA and VA loans are great products, sometimes they get a bad rep. This is important to know because if the seller’s agent isn’t educating their clients on the differences, they can lead their sellers to believe your offer isn’t as strong as a conventional offer. FHA loans often come with lower interest rates for a lot of buyers and a VA loan has one of the highest closing rates, often meeting or EXCEEDING those of conventional loans (making it less likely for the deal to fall through). The more you know!
Leaseback - Depending on the seller’s situation, if they still need to secure their next home, offering them a leaseback, where they lease the home back from you after closing, at little to no cost to them is a terrific way to stand out against the competition.
Appraisal contingencies - I’ve said the word appraisal a handful of times above, so let’s talk about it. An appraisal is done but an unbiased third party to determine the market value of the home matches the contract price. If, for any reason, the appraiser determines the home does not meet the value, you as the buyer can usually back out of the contract and get your earnest money back (just not the option fee). This is obviously a huge risk for the seller as the appraisal only comes back a week or two before closing and can mean they are taking their home back on the market and starting over. If you are able to make up a portion of the difference in the case of a low appraisal, there is a way to write that into the contract and strengthen your offer tenfold.
Close date - This one also depends on the sellers situation, but if they are already moved out it’s likely that a quicker close date is better than the traditional 30-45 day timeframe. Ask your lender the quickest they can close your loan and often they can get that down to 21 or even 14 days.
Your agent having the ability to gain intel on a seller's situation and using that to help guide you on structuring the best deal possible for both parties is the absolute most important piece.
And guess what... My winning streak remains! We won! What a great way to end to a busy weekend, right?
If you’re considering buying a home in Houston, download our free buyer’s guide here. And if you are looking for an agent who knows who to win a multiple offer situation AND get you, as the buyer, a great deal at the same time, I’d love to be your real estate resource! I was born and raised in Houston and have been an agent here for over 5 years, so it’s safe to say I know the city and suburbs like the back of my hand. — Payton Fisher, 713-557-0921, payton@paytonsoldit.com