Author: Bill Lewis, Vice President and Manager of Alain Pinel Realtors Los Altos
Purchasing a home is a challenging task in any market. Today’s market presents additional challenges with a shortage of inventory and an abundance of cash buyers. Add the strong possibility of multiple offers and the situation moves from difficult to overwhelming! Preparing yourself and an offer to compete in a multiple offer situation is critical.
First, you must decide whether you want to make an offer. With the current lack of inventory and low interest rates anticipated through next year, the time to buy is now. Each time a property sells, a new comparable is created to substantiate the next listing at an equal or greater price. Better to get in front of this now, rather than later when prices may be potentially higher.
Your agent’s level of communication with the listing agent is extremely important – you want to make sure you have the answer to some important questions before writing an offer:
When are offers being presented? And how many are being presented? A listing agent has a duty to disclose the number of offers being presented. It is also important to determine if they are committed to the date and time set – sometimes they entertain pre-emptive offers (offers that are presented prior to the date or prior to any market exposure of the property.
Does this listing agent have an offer of their own? If so, this may complicate and necessitate their manager’s involvement. It also raises the possibility of a variable rate commission (the agent agrees to a reduced commission if they represent the buyer), which must be disclosed to the MLS and involved agents.
Are there terms more appealing to the seller? Knowing the needs and terms more favorable to the seller will help you as you determine what to include in your offer.
How will the offers be presented? Offers may be presented in person from your agent to the sellers directly, in person from your agent to the listing agent (who in turn presents it to the sellers), or the offer may be delivered to the listing agent with instructions on how the listing agent should present it to the sellers.
Regardless of these answers, it is important to write your offer as soon as possible and let the listing agent know it is ready to present.
In preparing an offer, you will need to rely on the experience and expertise of your agent in determining how best to accommodate as many of the seller’s needs as possible without compromising your own. Some of the following topics will help guide you through that discussion:
- Making a first impression – You have one opportunity. Alienating the seller will hurt you.
- Terms vs. price – Price will always be a primary concern for a seller. No matter what price your offer, make your terms clean and desirable.
- Selection of a lender – Undervaluing the importance of a local, reputable and experienced lender will insure your failure. Shopping for a lender and obtaining a pre- approval letter is advisable prior to making an offer. Have your lender call the listing agent before the offer is presented to answer any questions about your ability to obtain a loan.
- Verification of funds – Provide proof of the amount and whether they are liquid.
- Contingent vs. Non-contingent – You will need to discuss this with your agent. Both options involve risk.
- As-is – This may be desirable to the seller. Be sure you are familiar with the condition of the property and are willing to accept the current condition without hesitation.
- Close of Escrow – Be familiar with the needs of the seller and the possibility of a rentback (allowing the seller to temporarily retain possession of the property after the close of escrow.
- Educate yourself on the property – Read the inspections and disclosures meticulously and more than once. Ask your agent for assistance with any concerns.
Now that your offer is written, the seller will consider options on how your offer will be presented. It is important to have a strategy for any type of presentation. In-person presentations allow your agent an opportunity to convey your message to the seller as well as answer any questions about your offer. If your agent is unable to present your offer directly to the seller, it is important to enclose your offer in a sealed envelope with instructions outlined on the outside of the envelope specifying when and where your offer should be opened and presented. This will help keep your offer confidential.
Be organized. With multiple offers, having a dynamic presentation may mean the difference between success and failure. A seller is not only evaluating the content of your offer, but the presentation, organization skills and knowledge of your agent. It may serve as a preview as to how the transaction would be managed by your agent.
Stand out and be you. Another effective strategy I’ve seen is to stand out by presenting information about you, the buyer, and your intended use of the home. Being able to create a personal connection may endear the seller to you. I’ve seen several successful (and creative) tactics – such as including a personalized letter of introduction, including pictures of the family and pets, videos of the family expressing their love for the home and even including snacks or meals to enjoy while reviewing the offer. Additionally, if you can accompany your agent to the presentation it conveys a high level of commitment and may allow a quick acceptance or change to your offer – be aware of your financial limitations if the seller counters on the spot!
The seller will have numerous options available when responding to multiple offers- from rejecting them all to countering more than one offer to create additional competition, or simply selecting one. This process can be emotional, so be prepared by discussing the different options with your agent in advance.
Finally, what constitutes an accepted offer? Your offer will be deemed accepted when the listing agent delivers to your agent or to you, an offer than has been fully signed by the seller(s). Unless and until the signed offer is delivered to you, there is no acceptance. To prevent another offer from being accepted in the interim, it is wise to receive the accepted offer as quickly as possible.
Every market has challenges and opportunities. This market is no different. With a good agent, a lot of knowledge and a little luck, you will achieve success even if there are multiple offers!
This article recently ran in the December 7th, 2012 Palo Alto Daily News publication Premier Homes.
Bill Lewis currently serves as Vice President and Manager of the Alain Pinel Realtors Los Altos which has consistently been one of the top producing offices within the company. Bill has over 24 years leading and managing real estate offices in the luxury and upper-end “Mid Peninsula” market. For more information call Alain Pinel Realtors Los Altos at 650-703-1602 or email at firstname.lastname@example.org.