Nowadays, it is common for homebuyers to discover that they aren’t the only party making an offer on the home they want to buy. It can be difficult to know what the correct approach is when finding themselves in multiple offer situations. Many buyers are looking for the home of their dreams, and it is become more difficult to purchase one with low inventory.
You might imagine that offering your highest and best offer is going to succeed, or that meeting the seller’s price will be good enough, but it might not be the case.
Every situation is different, and while these strategies might work out, it is difficult to predict how the seller will handle a multiple offer scenario. We look at the 4 biggest mistakes buyers can make when there is a buyer is in a multiple offer situation.
When the seller receives multiple offers, it is up to them whether or not they decide to notify potential buyers. While you might assume that it would be the best idea to notify everyone of multiple bids, it isn't necessarily the case.
Though disclosing this information could encourage other buyers to raise their bids, this isn't necessarily what will happen. It could actually put off off buyers, even if they had planned on submitting the full price the seller was asking. This could potentially mean that the seller loses out, and they don't get the high bids they would have otherwise received. In a situation like this, it would be in the seller’s best interests to not disclose these multiple offers. One of the terms of an offer on a home includes having a downpayment and this is one of the terms a seller will consider.
If you are looking to buy a home in a competitive market, you should assume that you will be competing against other offers. Your Realtor should have prepared a comparative market analysis for you to determine your list price. Write down an offer that you are happy with and stick to it. You don't want to be worried about offering more than you needed to, or for that matter, too little. Whatever the outcome, you need to be happy with the deal you have offered for the home.
If the seller has received a lot of offers, they may not even respond to all the offers they get. With a lot of offers, they have likely received some that they are very happy with, and if yours isn't one of them, you may not get a counteroffer.
While you could be tempted to offer a lower bid, or add some contingencies to the deal, don’t assume the seller will come back to you with a counter. It is easy to assume that the seller is obligated to give a counteroffer to the buyer, but this isn’t the case.
Even if you offer the full amount the seller is asking, you might not win against other offers. If the seller gets a few offers for the full amount, other factors and terms will start to become important.
The home buyer contingencies that are included as part of the offers could be the deciding factor. And the contingency periods required by the buyer are also going to be important.
This makes it crucial to keep your contingency period to a minimum. You might only need a few days for the home inspection, so don’t ask for two weeks, as the difference could lead to you losing out on the home.
Being flexible could also help. If you can avoid a firm closing date, you should find out when the seller would most like to close and go with that. Just asking a few questions before committing to your offer, could be the difference that pushes you ahead of the others.
If the seller is in a multiple-offer situation, they won’t want to wait around. Buyers need to move quickly if homes are selling fast in the area. If you want the home, you need to make an offer quickly to stand a chance of getting it. There are mistakes that sellers do not want to make by waiting too long to respond to buyer's offers as real estate is time-sensitive.
You may want to get contractors in to give you a quote for renovations, or delay so that your preapproval letter is updated, but whatever the reason, delaying isn’t a good idea. With more competition, buyers should avoid some of the things they would ideally want to do. This will prevent a delay that could push the seller towards a competing offer.
As a buyer, you need to be prepared to view a property at short notice and make an offer quickly.
Multiple offers with home buying do add more stress to the situation for buyers. But if buyers better understand the situation, and change their approach accordingly, they stand a greater chance of owning the home they want.
The above real estate article “4 Distressing Mistakes Buyers Make in Multiple Offer Situation” was written by Sharon Paxson of Newport Beach Real Estate. Sharon is a residential Realtor® with experience representing buyers, sellers, and landlords with their real estate transactions since 2005.