Tuesday, February 19, 2019 / by Trisha Cook
What makes an offer a strong offer?
Here are 10 tips to winning in a multiple offer situation.
The real estate market is HOT right now in the greater Savannah GA area, as it is in many real estate markets throughout the country! With limited home inventory in certain price points, the truly great homes are being sold within a few days or even hours of being listed! These newly listed homes are often receiving multiple purchase offers, which is excellent news for sellers. It is paramount for a buyer that is getting involved in a multiple offer situation, that they have a great real estate agent representing them that has experience with multiple offer situations.Losing out on a house can be heartbreaking and frustrating for a buyer, so make sure their offer is strong enough to compete!
1.Get Pre-Approved, Not Pre-Qualified (and provide proof up-front)
First things first, there is a difference between being pre-approved and prequalified and understanding the difference is extremely important. What is even more important is providing that documentation when the offer is presented or you could lose out simply because of that alone.
**Same goes for cash offers. Please provide proof of funds and an all cash exhibit with cash offers.**
2. Choose a Local Lender and well known loan officer with a good reputation:
I cannot tell you how frustrating internet and no name lenders make a home sale. It can simply ruin the entire transaction to have a lender that doesn’t know the area or area taxes, doesn’t answer their phone, who has so much red tape that the seller or seller’s agent (or the buyer’s agent or even the buyer) can’t ever get straight answers on the process, has unknown appraisers that also don’t know the area and 50% or more of the time appraise the house low… I could seriously go on and on about this but I will spare you. This alone could certainly be the reason why another offer is chosen over yours. My rule of thumb is that I want someone that isn’t far enough to not be able to reach out and choke if I have to. Just say no to internet lenders!
3. Explore Different Types of Financing
There are many different types of mortgage options available to a home buyer. The type of financing that a prospective buyer is going to be obtaining can impact a sellers decision during a multiple offer situation. For example, traditionally FHA Loan and VA Loan guidelines are more strict than a conventional loan program. This can include many guidelines, such as, ratios for debt to income, amount of down payment, or the amount a buyer can receive in concessions.
Additionally, FHA and VA appraisers will traditionally site more repairs than a conventional loan appraiser due to more stringent program guidelines. There can also be additional fees the seller has to pay with these loan types that can turn them off from even accepting an offer from the buyer. If a buyer who is approved for a FHA or VA mortgage, can be approved for a conventional mortgage program, it can be very helpful in a multiple offer situation. This gives the buyer the option to select which type of financing they would obtain, should the seller accept their offer.
4. Have Fewer Contingencies
A buyer has the option to make a purchase offer contingent on several different items, some that are more common than others! In a multiple offer situation, waiving or not including as many contingencies can make one offer more desirable than the next. While it’s not recommended in most cases to waive the opportunity to perform a home inspection, waiving a home inspection is very appealing to a seller.
The purpose of a home inspection is to ensure a homes current state is safe for the buyer. It’s extremely common that a home inspector will find concerns within a home which can cost a seller hundreds or even thousands of dollars in repairs. By waiving a home inspection, the seller is now “off the hook” for any repairs that would be requested after an inspection of their home.
Another thing you should consider is having lower days on your contingency period. In most cases, during those periods, the seller’s home is off the market with zero recourse if you can’t or don’t buy the home. Limiting the number of days may make the seller feel more secure about accepting your offer vs another.
5. Work with the Sellers
Understanding what the sellers plans are is important in a multiple offer situation. A great real estate agent should first find out either from the seller directly or from the sellers real estate agent, what the sellers plan is. Once this information is obtained, the purchase offer can be structured in a way that is more appealing to a seller. Do they want a quick closing? Do they need some time to retain possession and rent back? These are all things that are important and evaluated when a seller looks at multiple offers. It is important for the buyer to be flexible when able to be. Not all sellers want to close in 30 days. Some may actually need more or less time.
6. Make a Large Earnest Money Deposit
A buyer who is buying a home must provide with an accepted purchase offer a deposit, known as an earnest money deposit or good faith deposit. The amount of the deposit is variable. The larger the deposit can indicate to a seller the serious intent of the buyer to purchase their home.
In GA the contract rules have recently changed to say that the only compensation the seller can even go after is the buyer’s earnest money if the contract falls through. Because of this (and many other factors), 1% of the purchase price should be the MINIMUM amount of earnest money a seller is willing to accept to take their house off of the market.
If you present an offer with $500 or $1,000 in earnest money, you’re presenting a weak offer (unless you happen to be buying a home $100k or less).
7. Make a large down payment (or pay cash)
Putting a large percentage down towards a home can create an advantage for a buyer in a multiple offer situation. It shows a seller that the buyer has been disciplined to save a large sum of money to put towards a home, which can indicate the strength of that buyer. A larger down payment also can help things move along quicker at the buyers lender and increase the likelihood of a mortgage commitment being issued.
8. Make a strong offer & Keep your offer clean
In a multiple offer situation, don’t low ball! It’s heartbreaking and frustrating to a buyer when they lose out on a home, but expecting to win in a multiple offer situation while low balling is silly. If a buyer is in love with a home and there are multiple offers, the buyer needs to know, they will have one chance and one chance only at getting that home. A seller is likely to review all the offers and either accept one of them, or choose one of them to “work with.”
Buyers that are in need of seller contributions (aka seller concessions) need to be aware that it is a “two-way” street. A buyer that needs $5,000 in seller contributions should not expect to offer $5,000 below the listing price (assuming it’s priced well) and also get the contribution from the seller, especially in a multiple offer situation! If a buyer absolutely needs seller contributions, they should consider offering above the asking price, but keeping in mind that the home still needs to appraise for the purchase price.
An offer $10,000 over the asking price with $10,000 in contributions from the seller is a greater risk to a seller, as far as the home appraising, than an offer at asking price with no seller contributions.
Another tip that I, as a listing agent, love to see is an escalation clause! An escalation clause states that you are willing to outbid any other offers on the home by a certain amount, up to a ceiling price of whatever you are comfortable with.
And finally, keep your offer clean. If we have one offer with 9 requests in the stipulations that include everything from a home warranty, termite letter, house professionally cleaned, yard manicured, leaving the fridge, and even the kids favorite cat or x-box, rest assured that you can expect a counteroffer at best, if not just to be completely ignored. Keep your offer clean… don’t get hung up on personal property of the sellers or other items that have nothing to do with the truly important aspects of what you want to accomplish.
9. Choose a local & reputable closing attorney
Disclaimer: GA is an attorney state. Not all states are. And in Savannah, GA there are a ton of real estate closing attorneys. Typically the buyer has no idea of any closing attorneys so it is usually the Buyer’s agent that throws in a suggestion for this. I have seriously had a seller who chose one contract over another who overall had better terms merely because they chose to use a closing attorney in Effingham County, where her house was, vs attorneys in Savannah, which is an hour away from her house (and I don’t blame her one bit). What sense does it make to have to travel an hour with cars and trucks filled to the brim with moving boxes, kids and dogs in tow, etc when we can close in the same city and county as the home is in?
And even if the buyer does have a suggestion, please be careful of this as well. Some attorneys are not real estate specialists and some attorneys actually charge the sellers for fees that others don’t for things like mail away closings that could make or break your deal. I once had a buyer choose a litigation attorney that knew nothing about real estate and we all literally sit through a 4 hour long closing as he fumbled through the entire thing, reading notes and not knowing what to do next. They failed to wire in the seller’s pay off, which ended up in an additional $700 plus in late fees and interest for the seller as well. Don’t do that… you wouldn’t go to a neurologist for heart problems so, please…leave the real estate closings to the real estate attorneys.
Another possibility is asking the listing agent who he/she likes to use, as many times they may overall feel more solid about advising their client to take your offer if they are working with people they know, like and trust.
10. Tell the Sellers about yourself!
This is always a nice touch… to show the seller who you are and tell them why you believe the home is perfect for you. Typically this is done in the form of a cover letter to the offer. And you may even choose to attach a photo of you/your family if you want. **Please also be careful of what you say on social media. Sellers may search and find you to cyberstalk you before making their decision and you need to be prepared for this.
These tips can all have an impact on whether a buyer has their offer accepted when there are multiple offers, or even when there aren’t. It’s inevitable that in a multiple offer situation that there is always going to be at least one loser. Just know that there truly aren’t any guidelines to what a seller must accept and ultimately it is their decision. Put your best foot forward so that you won’t have to worry about regretting it later. And even if you do lose, you can always submit a back-up offer, just in case the primary contract falls through. Good luck!
Trisha Cook; Realtor & Chief Visionary Officer of The Trisha Cook Real Estate Team at Keller Williams Realty
Savannah, GA & Surrounding areas
Trisha & her team closed 314 homes in 2018; 279 in 2017 and thousands of homes over the last 15 years combined.
If you have any real estate needs in the Greater Savannah, GA area, please give Trisha & her team a call.
(912) 737-2935 office
(912) 844-8662 cell