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Preparation before, during, and after a bidding war is essential for providing optimal service to your home buyer client.
The low inventory environment engulfing markets across the country — coupled with almost unprecedented levels of demand driven by low interest rates and pandemic-fueled longings for wide-open spaces — means that multiple offers are almost a given in most real estate transactions. Even in outer suburban and rural areas, where demand is more or less stable from year to year, permanent work-from-home policies are resulting in increased interest and record-setting home prices.
Here are twelve ways you can help your clients weather the next multiple offer negotiation process — and how to ensure that everyone comes out ahead.
One of the best ways you can compete in a tight market is by nurturing your relationships with real estate agents and brokers in your area. Make time to stay in touch through professional organizations, brokerage events, and simple, friendly outreach. This makes you more likely to hear about listings before they hit the MLS and to get honest feedback throughout the negotiation process.
Managing buyer expectations is essential so that they can effectively prepare for the requirements of a hot market. Buyers today need to be ready to drop everything for a phone call or to sign off on a counter offer. They need to be willing to sweeten their initial offer if necessary. They need to be open to the possibility of changing their focus or relaxing their demands.
Have an honest conversation upfront and make sure your clients understand the process they’re undertaking. Review documents ahead of time and make sure they know how to use your transaction management platform. Now more than ever, time is of the essence when it comes to making or responding to an offer.
If your buyers are looking for a specific type of home in perfect condition in a specific neighborhood, they’re likely to be in for a shock in today’s market. Many buyers are finding themselves purchasing whatever is available with virtually no contingencies and paying far above asking price for the privilege.
Help your buyers think about ways that they can broaden their search, including looking in a new neighborhood or considering a fixer-upper. Make sure that they understand that they may not get everything on their wishlist and probably won’t have the ability to make many demands along the way.
Your offer is only as good as the professionals you’re working with. Your ability to win out over other offers may come down to how fast you can get a lender letter or how quickly you can schedule the closing. Make sure that the people you’re working with on each transaction are at the top of their game. While you may have a favorite colleague whom you’d normally recommend if he or she is not up to the demands of today’s market you need to find someone who is.
One of the most important factors in determining which offer to choose will be the strength of the buyer’s financing. Before they began, each buyer should be pre-approved for a mortgage loan rather than pre-qualified. In addition, buyers should be able to demonstrate their financial fitness with a generous earnest money deposit and significant down payment funds.
Have an in-depth conversation with the lender to get a solid understanding of how qualified the buyer is and also how quickly the lender can process the loan. The latter is key because you don’t want to put a 10-day appraisal or financing contingency in your offer if the lender can’t deliver within that timeframe.
Part of crafting a great offer is understanding what the seller is looking for. While some sellers are primarily price-driven, others may be more interested in a fast closing — or a slow closing that allows them to find their own next home. If possible, figure out what the seller is hoping for and craft the offer around his or her needs and preferences. A quick call to the listing agent to ask what is most important to the seller can not only help you submit an attractive offer, you may even win some brownie points with the agent!
Buyers may need to ask for as little as possible when it comes to contingencies in order to reassure sellers that the transaction will proceed quickly and reliably to the closing table. In some areas, buyers are waiving home inspection contingencies altogether. In others, they are requesting “information only” inspections with an upfront assurance that they will not ask for repairs. This is also frequently called “buying as-is with the right to inspect.”
Some buyers may feel comfortable waiving all contingencies, reasoning that they can financially address any problems after closing. Other buyers will not have the means or the inclination to do this. Take your cues from the client and educate them about the results of waiving any standard contingency.
This is no time for hand-written, out-of-order documents with scribbled-out changes or incomplete offer packages. Send along a properly completed package with every “I” dotted and every “T” crossed. Make sure that all signatures and initials are accounted for and that all of the requested information is provided.
Put the various documents in order with the sales contract, loan letter, and earnest money deposit copy upfront and the supplemental material last. Provide a friendly and professional synopsis in the cover letter or email with the information you want to particularly highlight.
Over the last year or two, we’ve heard stories of agents receiving 25+ offers on their listings. You don’t want your offer to get lost in the shuffle, so reaching out to the agent directly to confirm receipt is always something you should do and it’s one more opportunity for you to establish a relationship with the listing agent.
Good communication shows that you’re a professional and that the transaction will go as smoothly as possible for all involved.
If the buyer is an excellent candidate for a mortgage and they feel comfortable, ask the lender to contact the listing agent to let them know that the buyer has solid credit and that they foresee a smooth road to closing. Adding a second testimonial to the quality of the buyer can go a long way.
While your buyers will naturally want to have their offer accepted, they need to stay realistic and pragmatic in their approach. A desire to win at all costs just for the sake of winning can cause buyers to make bad decisions, personalize negotiations, and spend more than they should for a home they may not really want. Help clients keep their initial goals in mind so that they can properly manage their responses throughout the process.
Buying a home in a market like this one can be frustrating and discouraging. If your buyers have been through multiple bidding war negotiations and still don’t have the home they want, they’ll naturally begin to lose heart. Provide perspective for them along with a listening ear and a realistic assessment of conditions in your area. Most of all, be willing to let them take a break if needed until they feel ready to jump back in.
We hope this article was helpful and you feel more prepared and confident as you venture into the next multiple offer situation. If you have any other bidding war tips or strategies that you’d like to share with your fellow agents, please post them on the Building Better Agents Facebook page. We’d love to hear from you!
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