Winning Multiple Offers
Over the past several years, I have been involved in several multiple offer situations with my clients. We don’t always succeed, but my percentages are pretty darned good.
While the majority of the multiple offer scenarios are involving foreclosures and REO properties, that isn’t always the case. With the huge increase in home buying activity predicted by the experts for 2015, you will be encountering more and more multiple offer situations, even on consumer owned homes.
This is due to the short supply of available homes for sale; the increased amount of buyers that are able to purchase a home, especially after the government has instructed the mortgage lenders to loosen their purses; the spring home buying season which is typically the busiest time of the year anyway, is right around the corner.
There are several ways to make your offer stand out and be the chosen one.
The process isn’t rocket science. If you follow some of my tips below, it may increase your chances of successful multiple offer situations and be a superstar agent in your client’s eyes.
Any savvy Realtor will know the difference in loan products and what they will or won’t do. Make sure that your client’s offer contains the correct type of mortgage pre-approval letter that matches the condition and even the location of the home.
When working with investors and even traditional home buyers, it is in your best interest to run comps for the home(s) of interest prior to submitting an offer. You should also show your client the LP% to SP% is. In many cases, homes will sell for several thousand dollars higher than the asking price. (the most I’ve ever witnessed was a home that sold for $50,000 above asking price-last year)
Working with investors:
- If you are submitting an all CASH offer, include a copy of the buyer’s POF (proof of funds) that shows at minimum, an amount of their offer.
- A copy of their EM (earnest money) check for at least 10% if not more of the purchase offer. The seller will almost always demand 10% for earnest money; so why not present it from the onset? The higher the amount of the EM check, the more it increases your buyer’s chances of a successful offer.
- Home Inspections; if your investor is a contractor or has access to his/her own contractors, inspections may not be necessary. As Realtors, we are always taught to strongly encourage our clients to do home inspections, but if your client’s offer does not include that contingency, it will indeed increase their chances of winning a successful offer. (make sure they sign the inspection waiver to prevent you or your brokerage from being sued later)
- Closing date; the sooner your client can close, the better! The sooner the seller can get their home sold and out of their hands, the better your client’s chances are of being successful. Many cash transactions can close in as little as a week. (depending on whether or not the foreclosure deed has already been transferred and there are no title issues involved)
First time home buyers or move-up buyers:
- The same applies here what was written above about cash buyers. However, if your client is financing their purchase, pay attention to these tips for success.
- Include a copy of an earnest money check. I would suggest a minimum of $500. Keep in mind, even though Ohio real estate law does not make earnest money a requirement in a real estate transaction, almost every seller will demand one anyway. (again, the higher the amount of the check, the better your client’s chances of success will be)
- Include a recent copy of the buyer’s mortgage PA (pre-approval) letter. It should include at least the amount of the purchase offer and the property address. (check for any expiration dates)
- Home inspections; any seller will understand the buyer’s desire to have home inspections done, but be reasonable. The shorter time-frame that you put on the offer, the more attractive your client’s offer will be. (my standard is 10 days for inspections and 7 days for repair period) However, with the market getting tighter, I am going to recommend to my clients that we reduce these time-frames to perhaps, 7 days for inspections and 3-5 days for the repair period.
- Closing date; this too is very important. If the home is vacant, the shorter the closing date, the better (for the seller) if the home is occupied, the seller might need longer for the closing date due to having to locate and buy another home. In either case, you must consider your buyer’s lender’s needs. Some lenders can close as quickly as 2 weeks, even with FHA and some take up to 6 weeks to close.
- Last, but certainly not least. Is your buyer requesting occupancy at closing? If so, this could cause the seller some concern due to the fact that some purchase contracts do not complete due to financial reasons or others. If your client is willing to provide the owner with occupancy after the closing, that will give the seller some relief and might make the difference in accepting your client’s offer or not. However, as a Realtor, you should inform your client of the potential risks involved with this as they could possibly have to take a seller to court to evict them, so make sure that you at least convey this information to your client’s.
Here’s another tip that works for both cash and financing buyers. Tax pro-rations. Montgomery County Ohio is one of the few counties that operate using the short proration of taxes method. (the buyer receives 6 months less of seller’s credit of taxes at the closing) If your buyer is presenting an offer in a area that typically uses the long pro-ration method, there is nothing that says you cannot present the offer using the short pro-ration method (this will increase your buyer’s chances of having a better offer).
Hopefully, you will also be able to use this knowledge to help your clients become successful home buyers. (just don’t use this knowledge against me and my clients if we are involved in multiple offers together) LOL