As the real estate market starts to pick up in many parts of the country, real estate agents from small towns to the big cities are blogging, tweeting, ranting and raving about multiple-offer situations.
A seller’s asking price is just that: an asking price. The seller may choose to price their home above, at or well below what the actual market will bear. Then, with luck, come the offers from buyers. Sometimes, there are multiple offers all under the asking price. Other times, all offers come in right around the asking price.
But in some situations, there are more than six offers coming in over asking price. Depending on where you live, you, as a potential buyer, may be forced to compete with other buyers in a bidding war. Here are five steps you can take to beat the competition in a multiple-offer situation.
Hire a good local agent
In most communities, 80 percent of the business is done by 20 percent of the agents. These agents are experienced in the local market and have relationships with other agents as well as inspectors, contractors, mortgage brokers and appraisers. More than anything, these 20 percent of agents “get” it.
A seller is looking for a sure thing and a smooth, clean escrow. With stakes high, who wouldn’t want a sure thing? In fact, the last thing the seller (or their agent) wants is to enter into escrow with an inexperienced or out-of-the-area agent.
That’s why, when faced with multiple offers, a seller, guided by their agent, may choose to work with a lower-priced offer because that buyer has a good agent. Many times, a lower priced offer will be countered up to match the price of a buyer with an unknown agent.
Get your financial ducks in a row before making an offer
Before you can make a strong and winning offer, you need to have your finances in order. This means being pre-approved for a loan and staying in regular contact with your lender or mortgage broker. Have an auto email alert set up from your real estate agent’s MLS. Know the new listings as they hit the market and be prepared to visit them right away. Be ready to make a move when the right house comes along.
An informed buyer has been in the market for some time. They’ve seen multiple properties, either at open houses or private appointments. They come to the multiple-offer situation fully prepared, knowledgeable of the market and ready to present themselves as a strong, motivated buyer. The seller and their agent will appreciate that.
Don’t wait
Many times, a new listing is sold before the first open house. If a desirable property hits the MLS on a Tuesday, you need to see it Tuesday night or Wednesday morning. As agents tell sellers all the time, your first buyer is likely your best buyer. The buyers who don’t rest on their laurels get the home. They show that they are on it, they’re motivated and they really want the property. This often translates into a successful deal or smooth escrow for the seller and the listing agent.
If you’re serious about buying and have your financial ducks in a row, don’t wait for the open house. As soon as you see the listing, let your agent know you’re interested or have them start doing the research.
Make a ‘clean’ offer
There’s an assumption that the successful bidder simply pays the most money. But this isn’t usually the case. While price is a huge factor, the terms and conditions are as important, if not more so.
To make your bid the most compelling, be as flexible as possible to the seller’s needs. If you know the seller needs a quick escrow because they just bought a place, give it to them. If they just had a baby and need some extra time, go with a longer close or offer to close quickly but give them a “rent-back.” If you’re going to have inspections, check with the inspector and see if you can get an appointment soon after getting your offer accepted. That way you can remove your inspection contingency quicker.
The same holds true with an appraisal. If your lender is able to pre-schedule an appraisal or at least check their schedule, it can only help. The last thing a seller wants is to accept an offer, only to wait 14 or 21 days to discover the buyer can’t get a loan or the leaky roof scared them away. Make your offer clean with swift timeframes for contingencies. There have been times when a seller leaves 2 to 3 percent on the table; just to be sure the deal will close “cleanly.”
Present yourself in the best possible light
Presentation can’t be emphasized enough. Make sure your agent presents your offer to the seller in a professional way. The offer should, when possible, be presented in person. A contract should be typed, not handwritten. Without a doubt, a pre-approval letter from your bank or broker should be attached to the offer. A cover letter from you or your agent presenting you, as buyers, to the sellers should always accompany your offer. If there are disclosures presented to you prior to your making an offer, sign off on them. Make it clear to the seller that you’re serious, motivated and ready to move ahead should they choose to work with you.
Strong and clean is the way to go
It’s the common sense stuff that will help differentiate you from the pack. Be up front, show that you’re motivated and look at the big picture of your offer — not just the dollar amount.
Of course, many times the highest bidder wins. But every day, there are dozens of buyers who kick themselves because they would have paid the price that it took to win the bidding war. Presenting yourself and your offer in the strongest and most clean way will go a long way to assuring you come out on top.
When Laurence DeGaris moved into his first house last August, at the age of 49, the University of Indianapolis marketing professor quickly found himself missing some of the pleasures of renting.
"The best thing in my old place was Lou," DeGaris says. "Faucet leaking? Call Lou. Air-conditioning not working? Call Lou. Now that I'm a homeowner, I got no 'Lou.' You know anyone who does gutters in Indianapolis?"
Is it better to rent or buy a house? That's a question virtually all adults ask themselves at one point or another, and especially around this time of year, as some people consider their goals and plans for the year ahead. So before you answer the question, here are some other questions you should ask yourself first.
Is it important that your house is an investment? If it's very important, you might want to rethink your future living arrangements. "Americans were used to their homes being a store for wealth – something to liquidate in retirement and downsize," says Scott Shellady, a senior vice president of derivatives for Trean Group, a futures and commodities exchange in Chicago. "No longer the case. Houses can go down just as easily as they go up."
He adds: "The bull run in housing we saw in the '90s and early 2000s will not happen again in our lifetime."
Shellady also cautions prospective homeowners to think about the health of the city they want to live in before taking out a mortgage. "Bankrupt municipalities can't put out fires. They can't stop thieves. They can't pick up trash and they can't maintain roads," Shellady says. "How much would your house be worth if your municipality was in that situation?"
This isn't to say your house won't be worth more someday versus when you bought it. But if you want a robust investment portfolio more than you want to buy a house, talk to a financial adviser instead of a real estate agent. Additionally, if you believe you're going to be in a house less than five years and want to sell it at a profit, most experts suggest it's safer to stick with renting.
Have you crunched all the numbers? Ron Throupe, an associate professor of real estate at the University of Denver, says the biggest mistake future homebuyers make is comparing a month's rent to a month's mortgage payment.
"Many people don't have all the numbers," he says. "There are many additional fees you need to include to make a fair comparison: the principal interest, property taxes, property insurance, homeowners association fees and maintenance."
The maintenance, in particular, can't be underestimated, he says. As DeGaris found out, if your furnace goes out or a pipe leaks, you have to fix it yourself or hire a professional. And there are other ancillary costs as well. "As a homeowner, you may find you suddenly need lawnmowers and snow shovels and new furniture," Throupe says. "It all adds up."
Can you handle the stress? "Most people weigh the financial aspects of buying versus renting, as they should, since it's the biggest financial decision most people will make. But one big factor to consider when buying a home is stress," says Tim Lucas, editor-in-chief of mymortgageinsider.com, an informational website.
Lucas says the Holmes and Rahe Stress Scale, a landmark stress study conducted in 1970, ranks many events that go along with buying a home in the top 43 most stressful circumstances in life. Four events are specifically home-related: change in financial state (No. 16), large mortgage or loan (No. 20), change in living conditions (No. 28) and change in residence (No. 32).
"If someone has recently made other life changes such as marriage, which is No. 7, switching careers (No. 18) or having a child (No. 14), it might be wise to postpone buying a home," Lucas says. "Stress overload can lead to missed payments, which can result in destroyed credit or even losing the home. It's better to rent if your life is in flux, and then buy when your stress levels are lower."
How old are you? If you're in your 20s or even your early 30s, there are some excellent arguments for not buying a house. Not that you aren't responsible enough to be a homeowner, but you're young, and who knows where life will take you? If you have a house, however, you may find that life can't take you to all that many interesting places.
For instance, a recent study from Dartmouth College in New Hampshire and the University of Warwick in the United Kingdom found that when countries start seeing a climb in homeownership, unemployment rates start trending upward within five years. Why? It may have something to do with homeowners not wanting to move somewhere else to find a job.
"The decision to own versus rent is very much a lifestyle decision as it is an economic decision. In most cases, it is driven by household formation – people getting married, starting families and being able to afford to do so," says Hollis Greenlaw, CEO of United Development Funding, a publicly registered, non-traded real estate investment trust in Grapevine, Texas. "Less than 40 percent of people under 35 years of age own homes, over 60 percent of people over 35 years of age own homes, and over 80 percent of people over 65 years of age own homes."
Indeed, DeGaris is 49, and while he says that "professionally, renting has served me well because I had the mobility to change jobs, which really helped advance my career," he is glad he finally bought his first house.
"There's a certain feeling of groundedness that comes with owning," DeGaris says. "That might not be rational, but it's palpable. The gutters need work but the roof still doesn't leak, so at this point, I'm still glad I made the move."
So what's the answer to whether it's smarter to rent or buy? It probably won't be a surprise to most people, especially those with several decades behind them. But as a general rule, the older you are, the more likely that it's smarter for you to buy a house. The younger you are, the better off you are being a renter.
You've found a home that you like and are ready to make a home offer on it.
Before you put your offer in writing, make sure you understand what information you should, and should not, include in the home offer.
This article will help you.
The first thing you should do is forget about the myths you've heard about making a home offer. Many people buyers believe that once they've put in an offer on a home, that they still have the liberty to shop around.
While this is true, to some extent, it's in your best interest not to make any additional offers while you still have one on the table.
A home offer made on a piece of property is a legally binding contract. Should the buyer accept your offer, you are held to the offer.
There's another big reason why you shouldn't continue to shop around after you've made a home offer on a house. If you find a home you think you like more than the one you've made an offer on and the seller accepts your home offer, you are in an unfortunate situation. You will likely regret the decision to purchase the home for as long as you live in it.
Once you make a home offer, the seller can do one of several things: accept the offer, reject it, propose a counter offer, or fail to respond. If the seller does anything except accept the offer you still have the ability to continue home shopping.
When you're making an offer on a home there are several piece of information you need to include. The selling price is one of the most obvious. You don't have to offer the seller's asking price. You can go higher or lower as you so choose. Of course, the price you offer will depend on the amount you can afford to pay.
Your home offer should concessions that you wish for the seller to make. For example, if you want the seller to pay a portion of the closing costs, this information must be included in the offer.
You have the ability to stipulate that the home offer is contingent upon certain financing criteria. This keeps you from having to purchase the property if you do not receive favorable mortgage terms.
Don't leave out home inspection contingencies. Otherwise, you could end up purchasing a home that needs major work done to it. Your offer should include something to the effect of "subject to an acceptable whole house inspection report." Of course, if you are purchasing a fixer-upper, these contingencies might vary.
Don't make the assumption that everything you see in the house will be included when you make the final purchase. This includes appliances such as stoves and refrigerators. You must clearly define what is included in the sale.
Finally, you should include the amount of earnest money that you are depositing with the home offer.
Keep in mind that your offer can easily become the sales contract for your home if it is accepted by the seller. Make sure it includes everything you would want the sales contract to include.
