Deciding which offer to take when presented with multiple offers takes more than just picking the highest bidder. Every seller has to consider a number of factors about the potential homeowners they're dealing with, such as their financing and offer commitment. On the opposite side of the transaction, buyers need to weigh things like conditions in fine print - even blind bidding. So, how do you begin to even deal with a multiple offer scenario? This week, we look at five considerations for both buyers and sellers:
1) Priorities
First and foremost, discuss priorities with your Realtor. While you might have to compromise on some things, your Realtor will do what it takes to check off as many of your goals/priorities as possible.
Buyers - This will be nailing down your must-haves in and around your next home.
Sellers - This will be discussing the situation you are or will be facing when selling. For example: if you need to sell your home as fast as possible, you may be looking at losing out on four to six per cent in additional capital gains.
2) Strategy - Stick To It!
Once you have your priorities sorted out, you and your Realtor will work out the best strategy to achieve your goal. It's crucial that you stick to it! Once you veer off course, it's anybody's guess where you'll end up.
Buyers - You might find a home with a gorgeous walk-out basement, or a home with a hot tub included that'll make you want to throw caution to the wind. You want to beat other potential buyers by getting in your offer as quickly as possible...maybe even skipping an inspection to get the home ASAP. However, it may not be in the location you need, or it has a leakage issue that you won't be able to fix once you've moved in. Distance yourself from your emotions in that moment, and remember your strategy.
Sellers - Getting multiple offers makes you focus on the highest offer a) because you want to get the most money for your home, and b) it's easier to organize items based on numbers. However, the highest bidder isn't always the best bidder. They may be trying to compensate for less-than-stellar financial security, or for another reason altogether. Your Realtor can help you determine which offers are serious, genuine, and of course will help you get the most value from your sale. This determination will be based off of your strategy.
3) Offer Quality
Should the first offer be accepted because it was first, or does a seller wait until a certain date, or do they wait until they receive a certain number of offers? Housing experts agree that you should weigh the quality of the offer. Certain qualities should match up for an amicable transaction (Ex. Seller needs to relocate for work quickly, so they need a quick home sale. Buyer brings an all cash offer, and is flexible enough to accommodate the sellers schedule)
Buyers & Sellers:
Quality 1 - Finance. What is the buyer's financial position? Pre-approval? Earnest deposit? All cash offer?
Quality 2 - Concessions. Is the buyer waiving inspection? No appraisal?
Quality 3 - Flexibility. Is the buyer able to adjust their schedule if something comes up? How strict do they want the closing date to be?
4) Competitive Perks
When buyers compete, sellers win. Buyers will do what they deem necessary to stand out from the crowd of other offers.
Buyers - Some common things that buyers include in their offer to entice sellers are: paying some of the closing costs, include an escalation clause that offers to outbid others by a certain amount, and improving their flexibility when it comes to move in/move out dates.
Sellers - Keep an eye out for the perks listed above, as well as others. If your financial situation could benefit from a buyer offering to pay a portion of the closing costs, take it. If you need a buyer with a flexible schedule because it aligns better with your strategy, go for it. A competitive, genuine offer is what you're after!
5) Conditions
Buyers - In a hot market, lots of buyers feel the urgent desire to act quickly. While you shouldn't wait too long, don't waive conditions that are important to you. For example, foregoing a home inspection because it motivates the seller more is not a good idea. It may win you the bid now, but it could cost you tremendously when you move in. There are always other options, even if it means you have to wait a bit longer for it to hit the market.
Sellers - Take advantage of good offers, not buyers. Understand that conditions exist for a reason, and be fair.
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