In a hot market, there are more buyers than homes for sale. Prices may rise, and the days a home is on the market may shorten to a week or even less than a day. Some homes will sell before they are even registered in the local MLS. That means that sellers are often presented with multiple offers. How can you position your offer to be the one the seller accepts?
The best way is to gain an understanding of how multiple offers work and how they benefit the seller. Multiple offers mean that the seller has his/her pick of offers, but that doesn't necessarily mean a disadvantage for you as a buyer. You just have to determine how badly do you want this particular home. If you want to compete in a multiple offer situation here is what you will need to know:
Price & Terms
Just to give you an idea of how important terms are to the seller, let's look at a hypothetical situation. You offer a seller the highest price for his/her home, but you put in the contract a contingency that you must sell your home first before you close on the seller's home. It may seem reasonable to you, but these are terms that the seller has no reason to accept. Why would s/he wait for you to sell your home first?
The seller will only accept terms which meet his/her own needs, so keep contingencies to a minimum. Ask your agent to find out from the seller's agent what terms will be most favorably viewed by the seller.
If you can't get there first, get there the best way you know how
As you already have learned, the seller will accept the offer that best reflects his/her needs. They not only consider price, they also look at such things as financing and possession dates. That means room to negotiate for you.
Believe it or not, the highest price doesn't always buy the home. Sellers have a number of needs aside from price; they want a quick closing, or a delayed possession, or they may wish to exclude items in the home, and so on. Any offer which puts any of these goals at risk will not be accepted.
A buyer may make the highest offer, but perhaps has not been qualified by a lender. A seller who accepts an offer from an unqualified buyer is taking a substantial risk. Should the offer fall through because the buyer fails to qualify, the home will lose valuable marketing exposure and advantage. In a hot market, many sellers won't even entertain offers presented by unqualified buyers. (Hint: Get pre-approved for a loan. Not only will you know exactly what you can spend, you will demonstrate your seriousness to the seller.)
Your seller may have a special need that is more important to them than price. For example, your seller may have a need to sell quickly, but remain in the home for a period of time until school is out or until a transfer takes place. Your ability to negotiate on this point may be more important than coming up with the highest dollar amount. You can offer a short-term lease post-closing or offer to delay possession to accommodate your seller.
You can do a number of things to get the seller's attention - offer to pay full price, or a little above the asking price. Work with your agent to determine the seller's "hot" buttons, and act accordingly within your budget and your own needs.
Deadlines can be deadly
By the same token, if the seller counters your offer and gives you a deadline for accepting, and another offer comes in that is more attractive than yours, the seller can withdraw his/her counter offer to you in writing and accept the other offer.
Don't falter in the negotiations
In fact the seller's agent is under no obligation to let your agent or you know if there are other contracts on the table or not. The seller may be waiting to see your best offer before accepting another offer that may already be on the table. Multiple offers are often used by sellers to improve upon the asking price or terms. The sellers agent may be instructed by the seller to ask the buyers to "submit improved offers."
This is the time another offer can slip in and take your momentum away.
Answer promptly and with as much generosity as you can muster. Don't nickel-and-dime the seller with requests for small repairs, or complicate the contract with contingencies. Just ask for a repair allowance and take care of the problems yourself.
Hot markets don't stay hot forever
Also look at the affordability of the home. Are the extra considerations you are offering to stay in the contract really worth it? Do they price the home out of your range? Will you be able to afford the other costs associated with move-in such as furniture and updates?
Know when to throw in the towel
The best way to position yourself as the buyer whose offer is accepted is to work closely with an agent who can help you step by step from getting pre-qualified for a loan, to helping you find homes in your pre-approved price range, to helping you negotiate the home of your dreams.