Multiple Offers from the Buyers Side
When there are multiple offers on a property, the way you negotiate changes completely. I represent buyers, so here is a series of techniques that I use to have my clients be successful, because it is harder to get the home for your client when you have to win the competition.
The first thing you need to discuss with your client is how badly they want the home. Some buyers will not participate in a bidding war, so you move on to another house. If they have to have it, proceed.
The first thing you have to determine is what the listing agent is looking for in a buyer and what provisions are appealing to the seller.
Ask a broad question, “Is there anything else that is important to the sellers?” Listen well and take notes.
The more of the desired terms that you give the seller, the more likely you will be the successful suitor. You need to focus on much more than the price.
The next thing you need to know is what procedure the agent representing the seller is going to follow to respond to all of the offers. If the agent says they are just going to negotiate with buyers one at a time, you need to find out what will make your client that buyer. Some agents negotiate with the first offer that comes in, so be the first in time. Others select one offer based on quality. Whatever the criteria, find out what it takes. This is poor representation of the seller, but if that is what the listing agent is going to do, you need to learn how to play their game.
If the seller is going to give counter offers to the best qualified buyers, provide the best qualifications you can. If the seller is going to negotiate with all the buyers at once, be sure you get to stay in the game to get a chance at the property.
How Many Offers?
The most important information is how many buyers are making offers. If you are going to be the successful bidder, you will probably need to go over the asking price. How high you need to go depends on the number of buyers. Call the listing agent a short time before they are going to consider the offers and find out how many offers there are. The price you need is proportional to the number of buyers. The more buyers there are, the higher the price. You want to come in right before the deadline so that you will know about the other offers, but other agents will not know about your offer.
If you are in an area where multiple offers are not common, you may have a hard time convincing your buyer to offer more than the asking price. Many buyers think that the asking price is more than the seller wants, and won’t go that high. In a multiple offer situations, the abundance of buyers shows that the home is easily worth the asking price and probably worth more, because you will not get that level of interest in an over priced home. Even by going over the asking price your buyer will have made a good investment so long as you do not get too carried away by the auction effect. If the buyer is worried about overpaying, put in an appraisal contingency so that they can be protected by a disinterested appraiser’s opinion of the value of the property. However, you will need to explain to the buyer that this contingency may make the seller unhappy, and could move your offer from being the winner to being a loser.
Ability to Close the Sale
It is crucial to show the seller that your client can close the sale, absolutely, for certain, no ifs ands or buts. Follow the example above concerning furnishing bank statements, with key information blanked out to protect your client from identity theft problems shows strength. Also provide as complete a loan approval as possible. Think of the process as a horse race. The sellers are trying to pick the right horse, one that will for sure cross the finish line. You want to convince the sellers that if they bet on you, they will not be sorry.
Take it As Is
One other way to separate your buyer from the others is to commit that you will take the home “as is”, but retain the right to inspect the house. If you feel that there is a good chance you will get the home, get a professional inspection before the time for making offers, and attach your inspection to your offer to take it “as is”. The reason for this is that many agents have had buyers promise to take a home “as is”, then when they have been selected to buy the house, they have gotten “buyer’s remorse” about the high price they paid. So, they try to claim that the subsequent inspection showed problems they did not expect when they ask for repairs. With the inspection done before the offer, the seller is more confident that you will not have a change of heart between signing the contract and the close of the sale.
Avoid the Auction
A completely different buyer strategy is to try to change the listing agent’s procedure for dealing with multiple offers so that you completely avoid the bidding war and the auction effect that it has on the buyers. The book Create a Great Deal is coming out shortly, and it goes into detail on how to win when there are multiple offers without letting the other buyers have a chance to bid. You can reserve a copy of the book by clicking here. If you need to discuss how to do this before the book comes out, click here and join the Real Estate Negotiating Institute where we will discuss this technique in detail. I hope you are able to win the home for your buyers when there are multiple offers using these negotiating techniques.