Dealing with a Multiple Bid Situation — Advice for Buyers & Sellers
Originally Posted March 29, 2012
Most home buyers and their agents are not thrilled about competing in a multiple-bid situation, and contrary to popular belief, it can also be stressful for sellers and listing agents. BUT multiple-bids are a fact of life in this market, so if you’re buying or selling your home, you need to be prepared. Here’s my advice:
ADVICE FOR BUYERS
1) Accept the situation. In an ideal world, you would be the only buyer for your dream home. You’d see a great place, take a few days to think things over, then make a fair offer, which would immediately be accepted, and you’d move right into your new place. But in the real world, there IS competition and you won’t necessarily get the first house you bid on. Maybe not even your second or third. None of this should deter you from buying, though–you just need to know how to play the game.
2) Know what you want, know the market, and be prepared to act. Many list agents are now holding off on showings until the Sunday open house, and then reviewing offers with their sellers on Monday or Tuesday night. This means you will have a limited amount of time to view the property, make a decision and prepare your offer–it’s all easier if you have your pre-approval ready, have enlisted a buyer’s agent, and have a comfort level with the local inventory and market values.
3) Put your best foot forward. In a multiple-offer situation, it’s a waste of time to come in low, expecting to raise your bid during negotiations. Fact is, you may never get that opportunity–if a seller receives several offers and one is significantly stronger than the others, they will likely accept it. Going back to all buyers for their “best and final” offers is not a given. My advice to any buyer going into a competitive situation is to offer no lower than asking price. If you don’t think the property is worth it, or if you can’t or don’t want to go that high, then this is likely not the home for you.
4) Don’t underestimate the terms of your offer. Price is important, for sure. But so is the strength of your pre-approval, the amount of your downpayment, your willingness to work with sellers’ preferred dates, and how your agent presents you: as a knowledgeable buyer, committed to buying this home, regarding the home inspection as informational, rather than as a tool for renegotiation, etc.
5) Don’t get swept up in the hype. Know what a property is worth to you and set a limit on what you will spend if the sellers do come back asking for “best and final.” It’s not worth *winning* the home if you regret it later.
ADVICE FOR SELLERS
1) Make sure you and your agent discuss a plan for showings and offers. Will you begin showings immediately or wait until the open house? If showings begin immediately and a strong offer comes in before the open house, will you consider it or do you want to wait to get the full market exposure of the open house? There’s not necessarily a right or wrong answer here–what’s best for one client and property may be a bad idea for another–but you should talk these things through and have a plan.
2) When reviewing multiple offers, don’t put all the weight on price. The size of the downpayment is important, especially if there are not a lot of good comps for your home, because if the appraisal comes in low, a bigger downpayment may prevent the deal from tanking. Also consider the strength of the buyers’ pre-approvals, review their contingencies, and try to get a sense of their attitude toward this purchase–it is not uncommon for someone to get caught up in the competition and later second-guess themselves. An educated and level-headed buyer is a good buyer.
3) Be happy. We are incredibly lucky to live in a place where homes have retained their value through the national housing crisis. It’s good to remember this when things get stressful.