When you are looking for a home to buy, the chances are that there will be multiple offers on the house – at least in the current market. It’s not always like that, but for now it is.
Have you ever heard of the term seller’s market? Multiple offer situations are more prevalent in a seller’s market and that’s what we’re experiencing right now.
Many people think that if they have more money, they should automatically get the house, but this isn’t always true. Sellers are choosing offers that put more money in their wallets and which ones are going to have a better chance to close.
We will discuss what it means when there are multiple offers on a single property and give you some tips that will help you increase the chances your bid will be accepted.
What is an offer on a home?
The offer is the amount of money that the home buyer agrees to pay for the home to include other various terms in the contract. This is sometimes referred to as the “bid” on a home.
It sounds like an auction, right? It’s not, but it’s not a far stretch from one.
When a seller puts their home on the market, the property will be available for interested parties to view and submit an offer. If it’s a hot property (reasonable price, great location, incredible features, you get the point), then there’s a chance multiple parties will submit an offer.
How does the offer process work?
In Texas, the home offer process is relatively straightforward.
The buyer determines how much they want to offer for the home. For example, if the house is listed at $300,000, they might bid the asking price. However, if the market is highly competitive, they might offer a bit more to sweeten up the deal. However, if the house has been on the market for a while, they might offer a bit less.
In addition to the price, the buyer will determine what terms to add to the contract. Do they want the refrigerator? What about a home warranty? Perhaps seller concessions for new flooring throughout the home?
Everything is negotiable, but it’s the seller that accepts or rejects the offer.
Once the buyer is comfortable with what they’re offering, their real estate agent will draft all of the requirements into the One to Four Residential Contract. Once the contract includes everything the buyer wants, they’ll sign it, and the agent will send it over to the listing agent (seller).
The offer is now submitted – and we wait.
Now, the seller has to determine whether they agree with the price and terms. If they do, they sign the contract and send it back to the buyer. The home is now under contract, and no more offers can be accepted.
However, sometimes the seller will receive multiple offers for their house in a short time and have to choose which one they want.
All of these offers are competing against each other. This is why your bid if you want to have a chance at buying the home, has to be as competitive as possible.
What do multiple offers mean?
At this point, the seller has two or more contracts in front of them, and they have three options: They can pick one as is, counter offer any of them, or do nothing at all and hope for more/better offers.
Of course, they’re going to select the offer that benefits them the most.
So the offers have to be as competitive as possible, and it’s not just the price. Every buyer wants the home, so they must be willing to give their highest price with the smallest amount in return (concessions, warranties, etc.) if they’re going to get their bid selected.
There’s no hard and fast calculation to this; it’s more of an art than a science.
But don’t worry, an excellent real estate agent can help you navigate the options to submitting the best and final offer.
The seller has a good problem.
When there are multiple offers on a property, the ball is in the seller’s court.
Chances are one or more of the offers are above the asking price. Additionally, there are probably some that aren’t requesting a warranty, have very short option periods, or are paying with cash. These things make their offers more desirable in the eyes of the seller.
The seller is going to choose the best offer based on what they want. That might be the overall offer price, shortest time to close, or which one is most likely to close without issues.
That means the buyer has to put forth their best and final terms with their offer.
The buyer has to have a strong offer.
The buyer has an uphill battle if there are multiple offers on the property. They’re no longer the only offer on the table, so now they’re competing and hoping their offer is the best.
In addition to offering more money for the property, there are a few things a buyer can do to make their offer more appealing.
- More earnest money. This shows the seller that the buyer is serious. If the buyer backs out or breaches the contract, the seller keeps the earnest money. It’s an act of good faith.
- Short option period. Although the house is under contract during the option period, the buyer can back out at any time. Sellers want to get out of the option period as quickly as possible, so they know whether the buyer will follow through.
- Bring cash to the table. If you can afford it, bringing a sizable amount of cash can beat those with financing. Why? Because the home might not need to be appraised, lender issues are usually not a problem, and they’re serious buyers.
- Cover closing costs. Most people think that the seller covers closing costs, and that was true for the longest time. However, in this market, buyers are paying their closing costs more frequently.
- Don’t ask for anything extra. Take the home as-is. Sure, that warranty sounds great, but that’s an additional expense the seller has to cover. They’re going to avoid that if possible.
These are just tips (not hard and fast rules) for edging out the competition in a multiple offer situation. The bottom line is that you’re trying to make the offer as appealing as possible to the seller.
The seller has many options to consider when they’re presented with multiple offers on a property. On the other hand, the buyer is in steep competition with other offers and has to make a compelling offer to get theirs accepted.
Don’t hesitate to reach out if you want help navigating this process or would like assistance putting together your best strategy for getting your offer accepted!
