It’s Sunday evening, and John and Mary Homeseller and Anita Deal, their real estate agent, are sitting at the dining room table, ready to confront a pile of purchase agreements. The Homesellers were smart to listen to Ms. Deal’s advice and decided to entertain all offers simultaneously, rather than have them trickle in one by one.
It’s a hot market, and the Homesellers own an attractive Southern Maryland home that was priced right. One of these offers will win the day. Which one? And, why is your offer the one that didn’t? What does your competition have that you don’t?
They have loan preapproval
If they have the slightest suspicion that you may have trouble qualifying for a mortgage, a seller could eliminate your offer from consideration. Your competition has a leg up because they took the time to prepare for the bidding war by seeing a lender and going through the pre-approval process.
In fact, they may have even gone so far as to get a letter from the lender that states that they’ve completed the underwriting process and are ready to go, pending the home appraisal.
Benjamin Franklin was right: “By failing to prepare, you are preparing to fail.”
Their offer contains an escalation clause
Let’s say Mr. and Mrs. Homeseller are asking $250,000 for their lovely home. Since your competition knows there will be multiple offers, their aim is to submit the cleanest, strongest offer possible.
Their real estate agent, I.M. Best, wrote the offer at full price with an escalation clause stating that Mr. Best’s client will pay $2,500 more than competing offers up to a specified maximum – an amount his client is comfortable paying.
In essence, this buyer’s offer will increase incrementally up to that maximum. Is this a smart move? There are two schools of thought on this. Those who think it’s a wise move say that the strategy shows that you are earnest in your desire to win the home. And, in fiery real estate markets, the strategy grabs most sellers’ attention.
The naysayers feel that buyers may get carried away and place the maximum bid higher than they can live with should they win the bidding war.
If you aren’t comfortable with an escalation clause, your agent can request that your offer be held in backup in case the accepted offer falls through. This happens frequently in multiple-offer situations. In their frenzy to win the battle, many buyers make irrational offers that they can’t fulfill.
Your offer has too many contingencies
Think about the scenario at the beginning: Mr. and Mrs. Homeseller and their pile of offers. They and their agent will comb through every line of every offer, down to the smallest detail. We may not know exactly what their hot buttons are, but we do know that they want top dollar. So, it’s natural that the offering price is the first place they’ll look.
After that, they will turn to the terms of each offer. How many contingencies is each buy requesting? How long to they want to be able to take to fulfill them? Are there any deal-breaker contingencies, such as the buyer needing to sell his or her current home before consummating this deal?
Offers with too many demands and lengthy contingency periods will most likely end up at the bottom of the pile.
The competition that wins the home won’t ask the seller to buy him a home warranty, pay for closing costs or get nit-picky on the repairs he wants the seller to either make or pay for.
They have more cash than you
Cash is just as much, if not more so, “king” in real estate as it is in any other financial transaction. The all-cash buyer has an enormous advantage over buyers who need financing to buy the home.
Now, not many of us can pay cash for a home, but a larger down payment will be attractive to the seller as will proof that you have the funds to close the deal and the cash reserves to make up the shortfall if the appraisal is too low.
Some sellers are impressed with a large earnest money deposit and that strategy just might give you an advantage in a bidding war situation.
They did their homework
You probably lost the bidding war because your competition outsmarted you. They hired the right real estate agent who painstakingly researched current market value in the neighborhoods so their clients knew exactly how high to bid and when to stop.
Their agent took the time to speak with the listing agent to find out what the seller’s hot buttons are – what their motivation is for selling and what the buyer could do to help the seller reach his or her goals, and then structured the offer to purchase accordingly.
For instance, suppose the seller is hoping to be able to rent back the home for a month or two after closing while he closes on his new home. This is valuable information for the buyer to be privy to because her agent can structure the offer to allow the sellers to remain in the home after closing as tenants. In particularly hot markets, some buyers even offer the seller a reduced rent during the rent-back period.
They’re faster than you
In a seller’s market like we have here in Southern Maryland, time is of the essence. You need to be among the first to view a home if you want a chance to be one of the first bids. Sure, it’s challenging to create spaces, especially at the last minute, in a busy schedule to tour homes for sale, but it’s a must if you hope to be competitive in a multiple-offer situation.
Your competition likely signed up on their agent’s website to be notified of new listings as soon as they hit the market. Their agents are on top of their game by vigilantly seeking listings that fit their clients’ criteria.
Like any battle, it’s incredibly hard to win a bidding war against an equally matched foe. Hone your tactics and strategy and enlist a battle-hardened real estate agent, and the chances are good you’ll prevail.
White Plains MD Homes for Sale and Real Estate Services in Southern Maryland. You now have a search engine to help you with your Southern Maryland home search! And I’m ready to provide you with a custom home valuation if you’re considering selling your home. Let’s connect to discuss how I can help you. Contact Kimberly Bean at 301-440-1309
Powered by WPeMatico
