It s every home seller s> dream and every buyer s nightmare: multiple offers.
As the housing market continues to struggle, sellers don t yet have the upper hand as they did in the boom years. But some pockets of the country are seeing heightened activity and with it, properties that are attracting multiple bids.
Nationwide, existing-home sales jumped 7.6% in April and are nearly 23% higher than they were in April 2009, according to the latest data from the National Association of Realtors. The median price for an existing home was $173,100 last month, 4% higher than the same time a year ago.
Some regional markets are faring even better. For instance, the median selling price for a single-family home in April in Massachusetts was $295,000, 7.3% higher than a year ago and 5.4% higher than March, according to the Massachusetts Association of Realtors. The median sales price of a home in New York was 8.2% higher last month than a year ago.
We re not seeing as many multiple offers as we had at the height of the market back then, you could have 30 offers on a house, says David Kerr, a realtor with ZipRealty in the San Francisco Bay area. However, now we re seeing multiple offers, but more along the lines of four or five offers on a house.
No matter what kind of market you re in, if a home is priced properly, it will sell, says Valerie Van Cleef, associate broker at Coach Realtors in East Norwich, N.Y. And if sellers are willing to get aggressive in pricing, they can create conditions for multiple offers. One thing they should keep in mind: The highest offer isn t necessarily the best offer. If the buyer wants to move in within 30 days as a term of the offer, but the seller needs to wait three months before moving out, that buyer isn t a good fit. The buyer s loan qualification, down payment, credit history and overall financial position must factor into the decision, says Van Cleef, who recently listed a condominium in Woodbury, N.Y., that got three offers.
Here are some tips on how prospective buyers should handle a multiple-offer situation.
Set a limit
Multiple-offer situations create an auction-type atmosphere, and that can cause people to overspend because no one knows how much the others are bidding. Set a maximum price on how much you're willing to spend on the home, and don't exceed it. Go in with real clarity about what you can afford, says Tara-Nicholle Nelson, consumer educator with Trulia.com.
Be flexible on contingencies
Most states real estate purchase contracts include contingencies for inspections, appraisals, financing (the loan). These contingencies essentially allow the buyer to back out of the contract for a certain reason say, if the inspection turns up something you don t like. In California, the default for all contingencies is 17 days, but buyers and sellers can increase or decrease that number. So offering to shorten the inspection contingency to seven days, for instance, might make you look like a more favorable buyer, says Kerr. It shows the seller you re ready to make the deal. Just make sure you know your inspector can do job within that timeframe.
Arrange a call from the lender
Ask your agent to have your lender contact the seller when your offer is presented. When a lender calls the seller s agent and assures them he s reviewed the buyer s financial information and that they re qualified to make the purchase, it makes an incredible amount of difference to both the listing agent and the seller, Kerr says. It installs a great amount of confidence in the seller they know the buyer has all their financial ducks in a row.
Make sure you can afford to go higher
Before submitting an offer, check back with your lender to have them run the payments at that price especially if you re offering more than what you originally planned to pay or more than what you were preapproved for. Make sure you know what your new monthly payments, down payment and closing costs will be with the new offer, says Nelson, because they ll all tick up with a higher purchase price.
Recognize seller s values
Be aware that the seller may value aspects of the property differently than you and you can use their preferences to your advantage. If the seller has worked on her garden for years and you fawn over the rose bushes, you re going to look better. A mistake often made by unsophisticated negotiators is undermining what s important to the other party, says Robert Bontempo, a professor at Columbia Business School who teaches a course on negotiations to MBAs and executives. Some homeowners define themselves by certain aspects of house and they don t want you to rip up the garden, he says.
Write a love letter
Sometimes sending a personal note along with your offer could sway the seller. Kerr says a sincere letter about yourself with an explanation of why you love the house could go a long way in convincing the owner that you re a good fit. In a multiple-offer situation, you re trying to better the other would-be buyers. You re not really trying to negotiate with seller because you have no leverage, says Kerr. All you can try to do is make yourself stand out from the competition.
Read our story on common mistakes home buyers make.