Disclaimer: We are NOT attorneys. Inglenook Realty does not provide legal advice and users of our site should consult with an attorney before using any of the below ideas
DON’T LOSE OUT ON ANOTHER HOME! It’s a tough market out there if you are a buyer. If you are reading this post then there is a good chance you have either been involved in a multiple offer situation and lost or know someone else who has. The law of supply and demand is in full effect and in order to get the seller to sign the dotted line you need to put your best foot forward and make a strong offer that will win over the rest. Before we get into the strategies there are a few things you need to remember:
- Although it may happen, a seller is not required to offer a buyer a “Right of First Refusal” or the opportunity to increase his or her offer. There is a possibility that you may not have another opportunity to make an offer. Make sure your agent reaches out to the listing agent to find out exactly how that agent and/or seller will handle a multiple offer situation and what steps will be taken.
- Any terms of a purchase agreement can be amended and are subject to negotiation. Although most Capital District agents use the preprinted standard purchase contract form provided by our Multiple Listing Service, anything in that form can be amended by simply crossing it off and initialing next to it with attorney approval.
- A signed agreement using the standard Multiple Listing Form is contingent on review by both buyer and sellers attorney. An attorney has rights, without limitation, to make changes to any signed agreement or cancel any signed agreement within that attorney review period INCLUDING if another offer comes in. Just because a seller has signed your offer…it doesn’t yet make it a done deal.
Before I list the strategies, it’s important to understand what the ideal buyer is to most sellers. The ideal buyer would be a cash buyer that has provided proof of funds, waived all contingencies, put down a substantial non-refundable deposit, and has a flexible closing date. Any deviation from that “perfect offer” will make it slightly less appealing for a seller.
This one almost goes without saying but make sure you are pre-approved BEFORE you begin looking at homes. In this market, homes are many times listed and have offers within 24-48 hours. By the time you see the home, meet with a loan officer, track down the documentation they are looking for, and submit it to them for review the home of your dreams may be long gone. Furthermore, very few sellers will even look at an offer from a buyer that hasn’t been pre-approved yet and many times, won’t allow the showing in the first place.
When you place an offer on a home that offer must be accompanied by a deposit check. There is no “standard deposit” amount and this is entirely negotiable however generally speaking most agents will request around 1% of the purchase price as the deposit amount. This deposit can be forfeited if a buyer is in breach of the terms of the agreement. In a seller’s mind, the larger the amount of the deposit, the harder it will be for a purchaser to breach an agreement. You could also make the deposit entirely non-refundable. In other words, if you do not purchase that home regardless of the reason you would have to forfeit that deposit to the seller.
3.) Inspection Contingencies
Every purchaser has a right to have inspections completed on the property. According to the standard contract form, a structure should be free from an substantial defects in the structural, mechanical, electrical, plumbing, roof covering, water or sewer components of the property. The term “substantial” refers to one individual item that costs $1,500 or more to repair or replace. If a major defect is found, that allows the purchaser to back out of a contract entirely and receive a full refund of their deposit or attempt to renegotiate the contract for a credit to repair the items. A few ways to win that multiple offer would be:
- Waive the inspections all together. Sellers want a done deal. By waiving the inspections your are telling that seller that you are taking the home in as is condition and you won’t be cancelling the contract due to a failed inspection or trying to renegotiate down the line.
- Waive individual items from the structural inspection. For instance, if you know the roof is actively leaking and needs to be replaced, you could waive that from the structural inspection in order to show the seller that you are aware of it and you will not be asking for a credit later on in the transaction.
- Increase the amount of the term “Substantial Defect” from $1,500 to a higher number….perhaps $2,000 or more. If the seller is reviewing two offers with the same purchase price, a higher “Substantial Defect” amount may be enough to tip the scale in your direction and get that seller to sign on the dotted line.
- Complete the inspections in a very quick time frame to minimize any potential time off the market.
This is another obvious one but most sellers want the most amount of money possible from the sale. You could offer asking price or more. You could also use what is called an “Escalation Clause”. An example of an escalation clause would be, “Purchaser agrees to pay $1,000 more than any other purchase offer up to a total of $X” (Tip: make sure you put a cap on it and don’t leave it open ended). Talk to your attorney in order to determine exactly what the verbiage should say and win that offer.