Posted by Michael Sosnowski
Today we’re highlighting 5 of the best, most successful multiple offer strategies that really work in today’s real estate market, to ensure Maine Home Connection Buyers and Sellers end up with a purchase price that makes sense.
For would-be home buyers, competing against multiple offers to win the home of your dreams can be… more than a little stressful. Our buyers, sellers, and friends are all curious about how best to navigate a multiple-offer real estate transaction. There’s no doubt it can be difficult if you are not prepared with the right strategies.
Southern Maine is experiencing a seller’s market. Home inventory levels are drastically low and there are not enough reasonably priced homes available to meet the demand.
This frequently leads to homes selling much quicker than normal and often well above asking. It all boils down to the basic economic principle of supply and demand. If demand is high and supply is low, prices go up.
Buying a home can be very emotional, especially when you’re competing against multiple offers. We use these strategies for our clients, and we trust they will be helpful to you, too.
1: Have Your Pre-Approval Letter Ready To Go!
Let’s start simply. If you are looking at homes with a licensed Realtor® then you should already have a pre-approval letter in your back pocket. When competing in a multiple offer market, it’s especially important to be prepared! The very first step in purchasing a new home is to meet with a lender, and it is best to use someone locally – and get pre-approved for a mortgage. This should be an amount that you are 100% comfortable with spending. Too many home buyers that we meet with for the first time haven’t really given enough thought to financing. This may seem surprising, but it is unfortunately true.
Your pre-approval amount sets the entire stage for your home search. Now you’re ready to get out there and do some serious home shopping, not just some serious home touring. The reason it’s so important to have that pre-approval letter when you do decide to write an offer (and particularly when dealing with multiple offers) is it demonstrates to a Seller that you are a serious, pre-approved buyer that actually has the financial means to buy their home. If an offer you’re competing with doesn’t have their pre-approval letter, you can see how your letter puts you in the stronger position.
Working with a LOCAL lender, especially in today’s real estate market, is more important than you might think.
2. Increase Your Earnest Money
Perhaps 80% of all Maine home buyers had no idea what earnest money was when it came time to write an offer. It’s one of those things that doesn’t get talked about all that often. The earnest money amount in an offer can be a very subtle but effective piece in the ‘multiple offer strategies’ puzzle. Typically, earnest money is between 1-2% of the overall purchase price. On a $250,000 purchase, earnest money would usually be somewhere between $2,500-$4,000 in a traditional real estate market. A Buyer pays the earnest money after their offer is accepted. If you back out or the deal falls through for a reason not covered by contingencies, the seller potentially gets to keep this money. This strategy works if you have the cash available to pay a little more earnest money to show the seller how serious you are about buying their home and winning the offer.
Ultimately, if you do end up buying the house, the Earnest Money will either be applied to your down payment or your closing costs; consider it a small down payment for your new home. Sometimes it literally comes down to just a couple thousand dollars to win the offer–especially when you are in a multiple offer scenario!
3. Be Flexible
This may sound a bit vague, so let’s expand on it. One of the first hurdles in successfully winning a multiple offer scenario is getting the Seller to accept your offer, not the other buyer. Now that you’ve won and have the house under contract, the next few steps are the most critical in keeping the deal together and ultimately closing/purchasing the home. It’s important to remember that the seller had other options, so be as sensitive and flexible in your future negotiations as possible.
If your offer was contingent on inspection, be selective about what you ask the seller to pay for or repair. The seller is not going to be interested in spending thousands of dollars to fix a bunch of insignificant items that a buyer simply might not like or care for. In such a hot market, where the seller may have the opportunity for multiple offers, he or she may tell you to take a hike. Make sense? Respond quickly to any requests for information and be flexible if things like the closing date shift.
If you are aware of any stipulations that are of significant importance to the seller, try to accommodate them as much as possible. Remember, it’s the house you’re after, not the high efficiency washer/dryer combo or the awesome swing set in the backyard. If there are ways to accommodate the seller without giving too much, do so. And remember, don’t turn off the seller by being too demanding or overly critical of their home. It’s important to remember that, ultimately, the Buyer and Seller really have the same goal so why not be flexible with one another in an effort to reach that goal!
4. Offer More Than List Price
As the buyer, I’m sure you must be saying “There’s no way I’m paying over list price!” In the greater Portland area, as is the case in many other parts of the country, home buyers really don’t like paying the full asking price for a home; EVEN if it is perfect and EVEN if they are competing with multiple offers! The reality is, when you’re competing with multiple offers in a hot seller’s market, chances are whoever buys that house is going to pay over list price. So, if you really love the house then why not just go for it! Try not to get too caught up in the fact that you’re paying over list price. Sometimes Sellers will actually underprice a home in an effort to create a bidding war among buyers. That being said, it’s always important to remember your budget and a dollar amount you’re comfortable with spending. This is where the advice of a knowledgeable and professional Realtor® can be a tremendous asset! In a competitive market, a seller might scoff at being offered the list price for their home if comparable homes have been selling above list. Offer to pay what you think is a fair price based on the research you and your Realtor® have done.
There’s really no way of knowing what the other multiple offers are, so you have to focus on the fair market value of the home vs. a budget you’re comfortable with. We have worked with plenty of Maine home Buyers that actually decided to walk away from a home, knowing that it was in multiple offers, because they didn’t want to blow their budget out of the water. It’s easy to get caught up in “action” and forget that you have a budget. So stick to it and shop smart!
5. Include a Personal Letter with Your Offer
This is by far the MOST underutilized multiple offer strategy available. Even if you’re not in a multiple offer situation, this is still a great strategy that might save you a little money on the front end and may make for a smoother transaction in general. Buying and/or selling a home is a very emotional process for everyone involved, and, as human beings, we all love that personal and human connection with one another. Just look at all the sharing of personal pictures and videos all over social media. So, why not embrace that connection and include a short letter introducing yourself and talking about why you love the home so much!
Chances are the person selling that home loved many of the same things you do. BOOM! …now you’ve got a connection. Often we see the “selling side” and “buying side” pit themselves against one another like they’re enemies. In every Maine Home Connection transaction, we do our best to bring buyers and sellers together – at the end of the day a Buyer and Seller really have the same goal so why not be flexible and work with one another in an effort to reach that goal? This can be especially important in a competitive, multiple offer scenario.
We hope these 5 tips will help you in the current real estate market both now and in the future. If we can assist you with buying or selling a home, please give our office a call at 207-517-3100. We look forward to connecting with you