Going Once, Going Twice…..SOLD!
Let me start by saying that it is not easy out there for home buyers; especially here in the Twin Cities. If you’re reading this blog post right now, then chances are you or someone you know has found themselves in the treacherous waters of a “multiple offer” situation. Heck, even if you’re not reading this post right now, chances are you know somebody that has lost the home of their dreams to some other twin cities home buyer that came along and outbid them or maybe just had some better “multiple offer” coaching from their Realtor® and LOCAL lender. I can honestly say that I absolutely love ALMOST everything about helping someone buy their first home, but the WORST part of my job, is when I have to call my client and break the news that “they didn’t win the multiple offer” because the Seller chose someone else. It can be pretty devastating for a twin cities home buyer that just spent several weeks or even months to find just the right home, then they decide they’re ready to take ‘the leap’ and write an offer, then another buyer comes along that probably loves the house just as much and also decides to write an offer. Now what…..? That is why I’m writing this blog post. Successfully buying a home is tough when you’re competing against multiple offers and countless other twin cities home buyers, but it’s not impossible when you have the right strategy. I want to equip you, the Buyer, with some of the top multiple offer strategies in the real estate industry so you’ll have the best shot at winning your offer and hopefully getting the house of your dreams! There’s no guarantee that you’ll always win 100% of the time, but you will at least be as prepared as you can be to make your best and most confident offer. After that, it’s really up to the Seller and their agent to pick the strongest of multiple offers. In the following post, I will provide you with some of the top multiple offer strategies that my clients and other twin cities home buyers are using to get out there and fight off all the other ‘would-be’ home buyers and win the home of your dreams!
Multiple Offers Again?…….Geeez!
5 Killer Multiple Offer Strategies For Home Buyers!
1. Have Your Pre-Approval Letter Ready To Go!
Let me start by saying, if you are out looking at houses with a licensed Realtor® then you should already have a pre-approval letter in your back pocket! When competing in multiple offers it’s especially important to be prepared! The very first step in purchasing a new home is to meet with a LOCAL lender and to get “pre-approved” for a mortgage. (This should be an amount that you are 100% comfortable with spending!) Too many home buyers that I meet with, for the first time, haven’t even thought about financing yet. How else can you expect to buy your dream home if you don’t even know what price point you can afford? Your pre-approval amount, let’s say a 30 year, $250,000 loan for example, really sets the entire stage for your home search. Now you’re ready to get out there and do some serious home shopping, not just some serious home touring. The reason it’s so important to have that pre-approval letter when you do decide to write an offer (and particularly when dealing with multiple offers) is because that will show the Seller you are a serious buyer that actually has the financial means to buy their home. If the home “buyer” you’re competing with doesn’t include this letter with their offer you can see how you are in the stronger position now. Make sense? If you don’t have a good relationship with a LOCAL lender already, then your agent can help you find a reputable, LOCAL lender who is known and trusted. Notice how LOCAL is in all caps?! It is my opinion that working with a LOCAL lender, especially in such a hot real estate market, can be paramount to your success as a home buyer here in the Twin Cities and anywhere for that matter!
2. Increase Your Earnest Money
I would say that 80%, or better, of all the Twin Cities home buyers I have worked with had no idea what earnest money was when it came time to writing an offer. It’s one of those things that really doesn’t get talked about a whole heck of a lot, I guess. The earnest money amount in an offer can be a very subtle but effective piece in the ‘multiple offer strategies’ puzzle. Typically, earnest money is between 1-2% of the overall purchase price. On a $250,000 purchase, earnest money would usually be somewhere between $2,500-$4,000 in a traditional real estate market. The twin cities home Buyer only pays the Seller the earnest money after their offer is accepted. If you back out or the deal falls through for a reason not covered by contingencies, the seller gets to keep this money. You won’t pay it until your offer is accepted, but you’ll tell the seller how much you are willing to pay as part of your offer. Make sense? The strategy is to actually pay a little more earnest money to show the seller how much you love their home and win the offer. On that same $250,000 purchase you might opt to pay $6,000 or $7,000 in earnest money. Ultimately, if you do end up buying the house, that money will either be applied to your down payment or your closing costs; consider it a small down payment for your new home. Sometimes it literally comes down to just a couple thousand dollars to win the offer….especially when there are multiple offers!
3. Be Flexible
I know this one is a bit vague, so let me elaborate a bit. One of the first hurdles in successfully winning a multiple offer scenario is getting the Seller to accept your offer, not the other buyer. Now that you’ve won and have the house under contract, the next few steps are the most critical in keeping the deal together and ultimately closing/purchasing the home. It’s important to remember that the seller had other options, so be sensitive and flexible in your future negotiations. If your offer was contingent on inspection, be selective about what you ask the seller to pay for or repair. The seller is not going to be interested in spending thousands of dollars to fix a bunch of insignificant items that a buyer simply might not like or care for. In such a hot market, where the seller may have the opportunity for multiple offers, he or she may tell you to take a hike. Make sense? Respond quickly to any requests for information and be flexible if things like the closing date shift. If you are aware of any stipulations that are of significant importance to the seller, try to accommodate them as much as possible. Remember, it’s the house you’re after, not the high efficiency washer/dryer combo or the awesome swing set in the backyard. If there are ways to accommodate the seller without giving too much, do so. And remember, don’t turn off the seller by being too demanding or overly critical of their home. It’s important to remember that, ultimately, the Buyer and Seller really have the same goal so why not be flexible with one another in an effort to reach that goal!
4. Offer More Than List Price
As the buyer, I’m sure you must be saying “There’s no way I’m paying over list price!” Here in Minnesota, as is the case with most buyers in most other cities out there, but especially here Twin Cities home buyers really don’t like paying the full asking price for a home; EVEN if it is perfect and EVEN if they are competing with multiple offers! The reality is, when you’re competing with multiple offers in a hot seller’s market, chances are whoever buys that house is going to pay over list price. So, if you really love the house then why not just go for it! Try not to get too caught up in the fact that you’re paying over list price. Sometimes Sellers will actually underprice a home in an effort to create a bidding war among buyers. That being said, it’s always important to remember your budget and a dollar amount your comfortable with spending. This is where the advice of a knowledgeable and professional Realtor® can be a tremendous asset! In a hot market, a seller might scoff at being offered the list price for their home if comparable homes have been selling above list. Offer to pay what you think is a fair price based on the research you and your Realtor® have done. There’s really no way of knowing what the other multiple offers are, so you have to focus on the fair market value of the home vs. a budget you’re comfortable with. I have worked with plenty of Twin Cities home Buyers that actually decided to walk away from a home, knowing that it was in multiple offers, because they didn’t want to blow their budget out of the water. It’s easy to get caught up in “action” and forget that you have a budget. So stick to it and shop smart!
5. Include A Personal Letter With Your Offer
In my opinion, this is by far the MOST underutilized multiple offer strategies out there. Even if you’re not necessarily in a multiple offer situation, this is still a great tactic that might save you a little money on the front end and may make for a smoother transaction in general. Buying and/or selling a home is a very emotional process for everyone involved, and, as human beings, we all love that personal and human connection with one another. Just look at all the sharing of personal pictures and videos all over social media. So, why not embrace that connection and include a short letter introducing yourself and talking about why you love the home so much! Chances are the person selling that home loved many of the same things you do. BOOM! …now you’ve got a connection. Too many times, I see the “selling side” and “buying side” pit themselves against one another like they’re enemies that hate each other. Like I said before, the Buyer and Seller really have the same goal so why not be flexible and work with one another in an effort to reach that goal!? This can be especially important in a heated, multiple offer scenario.
Check out these other great resources from fellow real estate agents from all over the country!
- How Do Emotion and Logic Influence Which House We Buy? by Andrew Fortune
- How To Make An Offer On An Overpriced Home? by Kyle Hiscock
- 5 Things First-Time Home Buyers Should Do First by Dustin Brohm
- Home Insurance For First-Time Buyers: What You Need To Know by Bill Gassett
- 16 Things NOT to Do When Buying a House by Ryan Fitzgerald
- 8 Reasons To Get a Home Inspection Before You Buy a House by Xavier De Buck
At the end of the day, buying or selling a home is a very emotional transaction that can have many twists and turns and ups and downs. It is important to have a knowledgeable and professional Realtor® and LOCAL lender by your side and on your team! In my humble opinion, the overall success of your home buying or selling experience hinges greatly on the team you choose to surround yourself with when getting the process started. Good luck and happy house hunting or selling! ~Justin C.
About the Author: The above article “5 Killer Multiple Offer Strategies For Home Buyers!” was written and provided by Justin Culley. Justin is a full-time, professional Realtor with RE/MAX Professionals, and has helped many people buy and sell throughout the entire Twin Cities metro for years. If you are in the market to BUY or SELL a home and would like his expert advice, he can be reached via email at firstname.lastname@example.org or by phone at 612-581-6842. Let’s connect! Are you thinking of selling your home? I’m very good at marketing homes to sell quickly, and for more money. If you’re a first-time home buyer then you’ll be in good hands too. I’ve helped countless first-time home buyers through the entire process of buying their first home! I have a real passion for helping folks buy and sell homes here in the great state of Minnesota and I would love to connect with you! I help people buy and sell real estate in the following Twin Cities area cities & neighborhoods: Eagan, Hugo, Highland, Inver Grove Heights, Lake Elmo, Mac-Groveland, Mahtomedi, Oakdale, White Bear Lake and Woodury to name a few. Other specialty areas include: Kenny, Lyndale, Tangletown, Lynhurst, Armatage, Kingfield and Carag neighborhood.