When the market is strong and you are looking for a property in a popular price range or highly sought-after area, you might find yourself in a multiple offer situation. The National Association of REALTORS® reported that in early 2021 & 2022, nearly 4 offers were made for every home sold. According to the latest Realtors Confidence Index from the National Association of Realtors (NAR), homes today are receiving an average of 3.9 offers. That’s the most offers we’ve seen in January for the last 5 years (see graph below). It’s time for buyers to get comfortable with competing against multiple offers!
More buyers than ever are competing for properties. Low housing supply coupled with high buyer demand means you should be prepared to navigate a highly competitive market where homes sell fast and get multiple offers. Knowing the market you are entering helps eliminate the scariness of a surprise! Choosing the right REALTOR® to navigate you through can mean the difference between just making offers on homes and closing the deal on one!
Below are some tips that can be useful when buyers find themselves in this position.
KNOW YOUR NUMBERS
Knowing your budget and what you can afford is critical to your success as a homebuyer. The best way to understand your numbers is to work with a lender and get pre-approved for a loan. Pre-approval shows sellers you’re serious.
BE READY TO MOVE FAST
Speed and the pace of sales are contributing factors to today’s competitive housing market. When homes are selling fast, it’s important to stay on top of the market and be ready to move quickly. Your agent will help you stay up to date on the latest listings and help you put together your best offer as soon as you find the home you want to buy.
MAKE A STRONG BUT FAIR OFFER
When you’re up against other offers, putting your best offer forward from the start is key. Lean on the expertise of your agent to write a strong, fair offer right out the gate. But know, making an offer at the home’s asking price may not be enough in a competitive market. High-demand homes today often sell for more than their listing price. Your agent can help you understand the market value of the home and what other homes are selling for in your area.
HOW CAN I MAKE MY OFFER STAND OUT?
Each situation is different. The more information you can obtain about the seller’s needs or motivation, the better you can tailor your offer to meet those. However, that kind of information may be impossible or hard to come by. Small contract tweaks can make a big difference. Removing any contingencies that you are comfortable with helps create a more “clean” offer. Just remember there are certain contingencies you don’t want to give up, like the home inspection.
One of the biggest contingencies to come across in a hot market with a multiple offer situation is the home sale contingency. Avoid this at all costs! A good REALTOR® can suggest alternatives and other scenarios to consider. An offer with a home sale contingency when weighed against an offer without one ends up more favorable for the offer without the contingency almost every time. Utilize the expertise of your REALTOR® to work through all of these details, but always make sure any deal you make works for your situation.
DOES CASH ALWAYS COME OUT ON TOP?
Not all sellers have the same needs and priorities. At first glance, a cash offer can be appealing. Oftentimes, they can close quickly or have fewer contingencies (think appraisal), but not all the time. Cash offers also don’t always have the highest purchase price or the best terms for the seller. One seller may be looking for top dollar while another may need to close before the end of the month. These other terms or intangibles could tip the scales in your favor. Discuss what you are comfortable offering in terms of price and contingencies with your agent. It’s time to get creative!
DO I NEED AN ESCALATION CLAUSE?
An escalation clause is a provision in a purchase agreement allowing the buyer’s offer to increase (escalate) automatically if the seller receives a higher competing offer on the property. A poorly drafted escalation clause can certainly cause much more harm than it does good, so make sure your REALTOR® is well trained in these scenarios. The words written in the offer matter! Choose them carefully. This clause could just be the thing that helps your offer win out! However, it is not a guarantee. A seller will take all other terms and conditions into account, along with price, when reviewing offers.
HOW DO I KNOW IF THERE ARE MULTIPLE OFFERS?
Usually, your REALTOR® will be informed by the listing agent if there is more than one offer. If you have already submitted your offer, you will have a chance to revise your original offer. This revision, if you choose to do so, should reflect the very best and highest you can offer. If you have not yet sent in your offer this is a time to talk strategy with your REALTOR® and decide how badly you want the house!
HOW DO YOU KEEP YOUR SANITY AMIDST THE UNCERTAINTY?
This is easy! Remember that multiple competing offers in a hot market is a common occurrence. Your REALTOR® is your best resource for making an offer that stands out in a competitive market. They will help you put your best foot forward once you have found the right home. Get creative, make your best offer, and never make an offer for an amount that makes you uncomfortable. Consult your REALTOR® about your needs, budget, and other terms. Then, lean on them for advice and guidance!
As always, our agents at Three Sixty are here for all of your real estate needs. Start a conversation with us today about how we can help you buy or sell in the current market!
Source: How To Navigate a Market Where Multiple Offers Is the New Normal Keepingcurrentmatters.com (March 10, 2022) KCM Crew