After months of searching, you’ve finally found your dream home. It has a spacious yard, a gorgeous kitchen and living room, and yes, even a walk-in closet in the master bedroom. But before you can start discussing the closing date and housewarming party details, your realtor delivers some bad news — your offer isn’t the only one the seller is considering.
Prospective buyers are facing this scenario on a regular basis in today’s white-hot real estate market. That said, you don’t have to lose out on the perfect home just because others might be interested in it as well. Here’s how to handle multiple offers on a house and come out on top.
You want to have an advantage over the other hopeful buyers right from the start. That means being pre-approved and not simply pre-qualified. Many first-time home buyers put themselves behind the eight-ball because they either don’t understand the importance of pre-approval or assume it’s interchangeable with pre-qualification.
In short, getting pre-qualified means going over your financial picture with a lender and having them pull your credit to make sure it’s in line with today’s mortgage guidelines. Pre-approval, on the other hand, involves a more extensive underwriting process. Those interested in obtaining a pre-approval must provide financial information such as pay stubs, bank statements, and W-2’s.
There’s no question that a seller will favor pre-approved buyers in a multiple offer situation.
Offer more money
Sometimes it’s as simple as that. While other buyers may purposely come in with low offers, your best bet is to make a strong offer from the beginning. This shows the seller you’re not only serious about buying the property, but that you’re also not interested in playing negotiation games.
Have as few contingencies as possible
Maybe you’re up against other pre-approved buyers who are ready to make a strong offer, just like you. In this case, you may consider waiving as many contingencies as possible. This tactic essentially releases the seller from the responsibility of making any repairs prior to closing.
Now, as you may have guessed, buying a home ‘as is’ comes with significant risk. Even if you feel comfortable fixing a few things yourself, you probably don’t want to be stuck paying thousands of dollars in home repairs. So be mindful that not including as many contingencies has its pros and cons.
Work with the seller
No two multiple-offer scenarios are the same. That’s why we recommend having your real estate agent contact the seller directly and ask what their plans are. You may find they are requesting a leaseback or wanting to close quickly, for example. Communication plays an integral role in a situation where you’re trying to make your offer stand apart from the rest.
Create a personal connection
You may know someone who wrote a personal letter to the seller when buying their home. But does making this extra effort even make much of a difference? The answer is yes, creating a personal connection with the seller can ultimately make your offer rise to the top.
In terms of what the letter should say, realtor.com suggests going into what specifically made you fall in love with the home or neighborhood. Thinking of starting a family in the near future? That’s a detail worth mentioning in your letter as well. You get the idea — make it known to the seller how much you’ll love and take care of their home.
Steer clear of the bidding war
Your first thought in a multiple-offer situation may be to get involved in a bidding war with the other buyers. Even if you think of it as your dream home, try to stay level-headed and make sure you feel confident with your offer and terms. With that in mind, we advise against over-bidding at all costs. The last thing you want to do is put your family in a financial bind before the first mortgage payment.
Negotiate an appraisal gap
Things can get complicated when an appraisal comes in much lower than the buyer’s original listing price. In these cases, the buyer must increase their down payment amount and/or both parties must agree to a reduced price. We’ll touch on appraisal gaps more in a later article.
Secure a backup position
Let’s say you did everything you could to present an attractive offer to the seller. For whatever reason, though, they decide to go with a different buyer. Don’t lose hope! Should the first buyer drop the ball, you are next in line to get the residence at your terms. Check out U.S. News Real Estate to learn more about the always important backup position in a competitive setting.
As you can see, there’s a lot that can happen when more than one buyer is interested in a home. It’s yet another reason to work with an experienced, trusted realtor who goes above and beyond for clients.