I recently listed a house in South Orange on a Thursday, and by the following Tuesday the seller had accepted one of many very generous offers. While it is nice to be on the listing side of a deal like this, having to tell your buyer that they have been outbid on a house they love is about as pleasant as a knife fight in a phone booth. The reality is that the current markets in Maplewood & South Orange are rife with homes that are commanding multiple offers. If you look at the statistics you can see that, if a home is positioned properly, it will sell in an average of 17 days at an average of 102% of the asking price!
So what do you need to know as a buyer to help you come out on top of a bidding scrum? Here are some tips to ensure that you have a fair and fighting chance of getting your hands on those house keys:
1. Get pre-approved. Before you even go looking at houses, speak to a mortgage advisor and get a pre-approval letter. Some buyers are hesitant to do this, but you are really doing yourself a favor for many reasons. The first is that you want to be realistic about the properties you can afford, with both the overall price and the monthly payments. The process is free, and the pre-approval lasts for 6 months. Also, you need to be poised to put in an offer right away, and you can’t bid without one. Myth Buster: This isn’t a hard hit on your credit score! It also doesn’t commit you to actually securing your mortgage with that lender. I always advise my clients to shop around for rates once their offers are accepted.
2. Keep it clean. In the beginning of a transaction, all of the risk lies with the seller once they accept an offer. They have taken their home off of the market, and are relying on the assumption that everything will go smoothly from the buyer’s ability to obtain financing, to the inspection and the appraisal. For this reason they are usually looking for the buyer with the least complications to their offer. Of course, you can’t help it if you have a home sale contingency, but try to avoid asking for things that complicate the deal. If you need cash to cover closing costs there are ways to work this out with your mortgage broker rather than asking the seller to cover all or part of them. If you can close on a date when it is convenient for the seller, try to do this. Usually your agent will have a discussion with the listing agent and can find out what sort of terms are the most attractive to the seller.
3. Be ready to go all in. If you are competing with one other offer, you may not have to go to your absolute max budget, but you since it is illegal for the listing agent to reveal any details about the other offers to you or your agent, you aren’t going to know what you are up against. If there is competition, and especially more than one other offer, you should really consider coming in at the highest price you feel comfortable with. Now, as a buyer’s agent I obviously want my clients to get their house at the best price possible, but I also want them to get the house! The reality is that if you are in this situation you should work with your agent to really understand what it means to up your offer. Have them create some amortization schedules for you. You will see that, once you strip the financing down to the studs, raising your offer by $5,000 will be an added daily expense equivalent to feeding a parking meter for an hour. Then you can decide if it is worth it!
4. Get smart. Your agent should be showing you comparable properties any time you put in an offer on a house, but it is imperative to be educated in a competitive situation. Know what similar properties sold for, particularly if they went above asking price, and know what other properties are under contract and active. This will give you a solid parameter for where your bid should be. You want to have a strong offer, but you don’t need to over pay!
5. Like your agent. This may sound trivial, but agents are in a relationship business. If you like me & see that I am organized, honest & reasonable, chances are that other agents do too. While a listing agent doesn’t have control over the seller’s final decision, they can certainly advise them that, in their experience, working with Agent X is a far smoother process than working with Agent Y. While the seller will be making a mostly financial decision, if your offer is similar to another one it certainly won’t hurt you to be working with someone that you and the other agent both trust.
6. You can’t win if you don’t play. I had some clients come to me after they had lost 2 houses in multiple offer situations with another agent. When we found them THE house, they were hesitant to even put in an offer as the listing agent indicated to me that she was expecting at least one more. Of course it is stressful to be in competition to make the biggest purchase of your life, but I did remind them that if they didn’t put in an offer then they had already lost the house. At the end of they day they came in strong and I am going to be seeing them doing their grocery shopping at our local King’s starting in June.
Hopefully you won’t find yourself in one of these situations but, chances are if you see value in a property, other people will too. All you can do is walk in armed with knowledge, your shiniest offer, and a good agent to represent you.