Multiple Offers: 6 Ways to Beat Out the Competition
15 offers!!! WHY!!??
In a normal (read: typical, healthy) real estate market there is 4-6 months of inventory, or homes to purchase. In our Charlotte region, there is currently ONE MONTH of inventory!
With historically low interest rates and a huge pool of buyers, there is high competition for the very low inventory.
Frustration is normal with buying a home. It's a rollercoaster of emotions because it is one of the largest financial investments you'll make in your lifetime! But, there are ways to set yourself up for success:
1) Find a lender who will "FULLY UNDERWRITE" your loan up front. That means that the lender can process nearly all of your financial information very early in the process, so by the time you submit an offer on a house, it's nearly a done deal. This level of loan security makes sellers feel very at ease. You can beat out higher offers this way! My buyers do!
2) Money matters: In North Carolina, we have Due Diligence and Earnest Money funds which are submitted after acceptance of an offer. This is your "good faith" money.
In a traditional scenario, you'd put up 1% of the purchase price of the home. In a multiple offers market, consider offering a total of 2% or 3% of the purchase price of the home. This is money you risk if you don't close. But this money is leverage, and seller-assurance that you will be motivated to close on the home. Remember: This initial money gets credited back to you at closing. :-)
3) Shorter inspection period: If you have a conventional loan, and the house is in excellent condition, you may opt for a shorter inspection period. This provides the seller with some comfort that you are committed to the house, and you won't make them wait 3 weeks to see if you cancel the contract.
Note for VA and FHA buyers, you typically can't do a short inspection period because the appraisal scheduling may take time, and you need to ensure you can negotiate repairs as needed.
4) What about a letter to the sellers?
There are two thoughts on this: some say it is a violation of fair housing, because if you include a picture it may sway the sellers based on your personal demographics.
Some say multiple offers are a blood sport and you have to use every tool at hand to achieve your goals. If you DO craft a letter, pull those heartstrings! Humanize yourself, make the sellers feel good about you, and about their house.
In one recent purchase, I shared the buyer's story by phone with the listing agent. He was buying a home for his disabled mother to come live with him. That offer got accepted over a cash offer!
5) Offering Over List Price: In a multiple offer situation, many offers will be over list price. Be willing, be bold, but be STRATEGIC. Going over list is great, but you also want the house to appraise. Going $15,000 over list is great, but if the house doesn't appraise, you'll have to come out of pocket at closing to cover the cost. or potentially re-negotiate price with the seller.
Bonus Tip: Please DO NOT ask for seller-paid closing costs in this frenzied market. There was one scenario where my clients were 1) buying a rural home, 2) with no other competing offers, and 3) we came up over list price to get coverage for some closing costs so the seller would break even. This is rare.
In this market, if you need to ask for seller-paid closing costs, you should:
Wait and save money
Reduce your top house budget to accommodate for your current savings
Ask for gift funds from family
Buy new construction and get your loan through the builder's lender, taking advantage of seller-paid closing costs that way.
Look into specialized programs to help with closing costs, but proceed with caution. Unfortunately, some sellers don't want to accept certain public service programs because of the hoops they have to jump through. Talk to your trusted real estate advisor.
6): South Carolina WINNING:
In the Palmetto state, the home contract has 3 different types of inspection procedures:
To win multiple offers, you may wish to opt for "As-Is" which means you agree to accept the home as it currently is and you waive the right to ask for repairs. This only works for conventional loans. FHA and VA buyers need the option to negotiate repairs if needed.
The other option (my favorite) is "Repair Procedure" which ensures the opportunity to inspect the house, and ask for major issues to be repaired if needed. This offers the buyer protection, and the seller some assurance that you won't nitpick them on small concerns.
In this multiple offer market, I do not recommend a Due Diligence Procedure. Although it provides the buyer with the most leverage in terms of repairs, sellers are ready to move on and don't want to be nitpicked by small repairs.
Bonus Tip: There is one more option available in SC for conventional loan buyers...the right to buy the home regardless of the appraisal. You can commit to purchasing the home despite the outcome of the appraisal. Sellers love this because it ensures that you will close regardless of the home's assessed value. Know that you will have to come out of pocket at closing for the discrepancy between contract and appraisal if the value is lower than the contract price.
You CAN WIN multiple offers! Use a combination of strategies to go get your house! Call me if you need expert guidance. I love WINNING for you!