Multiple Offer Tips & Tricks
For the first time in our history, the number of recorded sales outnumbers new listings on MLS. Demand currently exceeds supply and shows no sign of slowing at this point. A consequence of this environment is multiple offers, which has become the prevalent theme of 2016.
Below you'll find a graph representing the number of new and active listings compared to the number of sold listings over time based on the specified listing type. You'll notice the trend for the bulk of the new listings and sales occurs in the first half of each year. This is true for 2016 as well. In May we had 259 new listings and 274 sales reported - marking a shift in the 10 year trend.
While this creates a very exciting and positive experience for Sellers, it becomes a frustrating and discouraging experience for Buyers. The market is full of ready, willing and eager Buyers intently watching their MLS listings (it's almost a full time job staying on top of the changing market!). Some listing Realtors will hold off a week on offers, to ensure that every potential Buyer has had an opportunity to view and consider the home. Some Realtors present and take the first offer brought to the table. Because of these different selling styles and strategies, it's important that you work closely with your Buyer's agent to make sure you don't miss out on an opportunities.
If you are lucky enough to view a property in time and decide it is the right opportunity, you can still find yourself in a Multiple Offer situation. Now that you have invested time and energy (and probably envisioned Christmas dinner there) it is time to make sure you give your offer it's best chance at being accepted.
How do Multiple Offers work?
- Your Buyer Agent will inform you when they are certain that multiple offer situation exists.
- Buyers usually make their best offer as they more than likely won't have another chance to revise or up their offer.
- Write up the offer as cleanly as possible - the fewer conditions you include, the more attractive it will be to the seller.
- Be aware that even a full-price offer does not guarantee your purchase of the property - other offers may be for above the asking price or may have more attractive conditions attached.
- A seller has no obligation to respond to or counter your offer. If this is the case, your response is as simple as, “Sorry, we accepted another offer.”
- The Seller may counter your offer, but there is always the possibility that the seller could rescind the counter-offer and accept another one before you have had time to consider and respond to the counter-offer. Go into the offer with absolute certainty of your "best and final" (if it wasn't already the number you put forward). The Seller may counter dates or other terms, so be prepared to immediately respond to any changes.
- Offers can be so alike that a seller may ask all buyers to resubmit with an improved offer. The other Buyers might have put their best and final offer forward, and choose not to resubmit. This could potentially be your second chance.
- It might help to wait outside in your car while your Realtor presents your offer so your Realtor can come out to you to present any counter offers. This allows you to make quick decisions. If you can't be there, wait by the phone on baited breath. Time is always of the essence, but especially in multiple offers.
- If your offer is unsuccessful you may choose to make a backup offer. If this is accepted, would come into effect should the First accepted offer collapse for any reason. This will also mean that if the current offer tries to extend any conditions, or, in the event of a bad building inspection, renegotiate, then the Seller can opt to collapse the first offer and put your back up offer in the first position. This means you will be tied to the house for a couple of weeks (and not able to offer on anything else), but if when you know it's the right property, it could be worth the risk.
How do I strengthen my Offer?
- If you have the luxury of flexibility, leaving your Completion/Adjustment (the day you pay for the house) and Possession (the day after) dates blank will make your offer appealing to the Seller. They can choose any date that works for them, which takes a lot of pressure of of them. They might have a plan in place for their next home, so they'll want to line up the dates accordingly. Or, they don't know where they're going, and a long closing is what they are hoping for.
- Don't under estimate the power of an emotional appeal. There can/is a lot of sentimental value attatched to a home, so take the time to write a letter to the Sellers about yourselves, why you love the location/layout/finishing and the plans you have there with your own family.
- Have as few conditions as possible - the easiest way to achieve this is not including a Title Search or Property Disclosure Statement approval clause. Pre-approve these forms with your lawyer/notary.
- Be pre-approved. In this market, you should be pre-approved prior to shopping, anyway. But if you can provide your pre-approval letter, that will help your case. The lender will likely still need to order an appraisal on the property, so keep your Subject to Financing clause in there for your protection. Unless, like a lot of our recent mainland transplants that locals are now competing with, you can bring a cash offer to the table.
- Due to the nature of a hot market, building inspectors are slammed. If you can tentatively book a time for your inspection, it will not only make you appear very serious and committed, but it gives the Seller confidence that you'll be lifting your conditions on time (as soon as possible).
- Having an experienced and well liked Buyer's Agent. As unfair as it is, interpersonal relationships and a history between the Buyer and Seller's realtors can affect the outcome of a multiple offer. If the Seller's Agent can inform their Sellers that the Buyer's Agent is known to carry deals to completion and has had a positive history of cooperating on deals, it will only improve your chances. Real Estate is a very personal business, with a lot of personalities involved (buyers, sellers, realtors, etc) all working together with a common goal. The Realtor in your corner can encourage (or discourage) a Seller to interact with your offer.
- Today, even a full price offer does not guarantee you will win against the other bids. More frequently we are seeing properties trade over asking.
On that note! Deciding on your Purchase Price will be the most nerve-racking part of signing off on your offer. At the end of the day, the market value is whatever a buyer is willing to pay for a property. Ask yourself, "How would I feel if I lose the property on price by $5,000?" Commit to offer your best price as you may only get one chance to win out. Choose the number that you can sleep at night with - whether you win or loose. Only you can decide what a property is truly worth to you. Your Realtor can provide all the market statistics and guidance to help you arrive at a price, but you can’t put an analytical value on an emotional connection to a property.