By David Knox | September 2021
In my blog “What Should We Offer?” I discussed how to prepare a buyer for selecting an offer amount with a “no regret” price. In this blog we’ll address buyer and seller issues involving multiple offers.
Sellers must be prepared for multiple offers. Before you go live on the market, be sure you have established what they think to be the “best” offer. Certainly price is at the top of the list, but you must also have them consider closing dates, possession dates, contingencies, appraisal, inspection and personal property. Have them consider all the variables so when offers are submitted, they are ready to make a decision.
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Prepare your buyers for multiple offers by discussing those variables that sellers will consider. Short of submitting a blank purchase agreement and having the sellers fill it in (joking), counsel your buyers to make all the key negotiating points as favorable as possible.
Earnest money. Clearly, the larger the better. Provide proof of funds in writing from the institution that holds them. I heard a story of one buyer attaching a photo of actual cash in a briefcase. Drama goes a long way here.
Financing. Cash is king, so if your buyers are in that position, you’ll be ahead of the rest of the buyers. This is possible if their previous home is sold/and or they are in a financial position to own two for now.
Closing date. For many owners, closing dates are a key issue. In the past, the sooner the better, but now they may prefer to wait. The perfect scenario for many may be a quick closing and long possession date. A cash offer will close the soonest.
Possession. The real answer to the “best” closing and possession date is determined by the seller. Don’t assume what they consider preferred timing, ask the listing agent. In this market, your best offer may be to allow the sellers to stay in the home for an extended period of time, allowing them more time to find another.
Personal property. This has always had the possibility to junk-up an offer and make it less acceptable. If the buyers are already willing to pay more for a home, then personal property should not become an issue. Confirm with the listing agent what is included. When in doubt, leave it out, then negotiate to purchase it later.
Appraisal. Some buyers are waiving the appraisal contingency to ease the seller’s mind. Be cautious with having buyers give up this protection and be sure they can cover the difference in cash. A partial measure would be to state how much over the appraised amount they are willing to pay.
Inspection. Given buyers’ desire to pay more for a home, worrying about repairs may be a moot point. They could still get an inspection for their own information but not make the sale contingent upon it. Caution is required here as well because they are giving up another consumer protection.
Buyer letter to seller. This may be a good way to get a seller to look at your buyer’s offer. But before you proceed with this, be very careful about violating Fair Housing policy. Anything in a letter that would indicate that the buyer is in a protected class will create a dangerous legal situation and moral dilemma.
For a buyer to express flexibility in the contract terms, or offering to make arrangements for the seller to stay until they find alternate housing, should be safe.
A friend of mine wrote a letter saying that their reason for purchasing was to continue maintaining all the flower gardens and landscaping. The owners took pride in them and appreciated knowing they would be maintained. Their offer was accepted even though it wasn’t the highest.
Some agents have had this letter be part of the contract. Be sure it doesn’t give away your buyer’s negotiation power.
There is a point at which the benefit of the bargain may not be enough for buyers to make these sacrifices. If so, this may not be the market in which to buy.