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How to Win in Multiple Offer Situations

The Augusta real estate market is still very much a seller’s market, and more times than not, there will be at least one other competing offer whenever we write an offer on your future home. 

A few years ago, if there were multiple offers, you could typically just offer a few thousand over list price and have a very good chance at securing the home; however, the market is so competitive right now that simply bidding more than list price is usually not enough. 

Now is certainly not the time to put your friend or family member who just got their real estate license in charge of helping you buy your next home, because, odds are, they will not yet have the experience to know what it takes to make your offer stand out above 5, 6, or even 10 other offers. 

Here are few strategies I have employed recently that resulted in accepted offers and happy clients:

1.  Make your first offer your highest/best.  Read on to see what this may entail.

2.  Offer about 5 percent more than list price, or don’t even bother.  There are exceptions to this rule, such as properties that have somehow lingered on the market for while and may not have multiple offers, but for new listings especially, go high or go home (probably not to THAT home though.)

3.  Be willing to waive part or all of the appraisal contingency.  By default, banks require that a home appraise for at least the sale price in order to issue the loan.  This means that if the seller accepts an offer with TOO high of a sales price, they would be forced to reduce the price to the appraisal price.  To sweeten your offer, you may need to offer to pay part or all of the difference between the sale price and the appraisal price, so that the seller is protected in this situation.  Most real estate agents do not even think to do this, so adding this stipulation will make your offer stand out above other offers that are also over list price.

4.  Add a price escalation clause.  This is one of my favorite “tricks” of the trade, because like waiving the appraisal contingency, less experienced agents do not even know what this means.  An escalation clause (with a maximum cap price) automatically increases your offer price to be, say, $1,000 more than the next highest competing offer up to a price you name.  By making that maximum cap price 3 to 5 percent more than list as in tip #2 above and also applying tip #3 of waiving the appraisal contingency, it will be very tough for anyone to beat your offer.  

5.  Make a generous earnest deposit.  Until recently, $500 or $1,000 was usually plenty for an earnest deposit for an average priced home; however, that has changed of late.  You will want to put down at least 2 percent of the sale price.  Now, before you hit the panic button, the earnest deposit gets credited back to you at closing, or if you terminate the contract during due diligence, so the risk to doing this is actually pretty low.

6.  Reduce the length of Due Diligence.  If this will be your first time buying a home, you get what is called a Due Diligence Period when you go under contract to buy a home.  This is a period (normally 14 days) where the home buyer can change their mind for literally any reason, and the earnest deposit will be refunded to the buyer.  I never recommend completely giving up this right, but a shorter 5 or 7 day due diligence period can further strengthen  your offer.

To close, let me just say that my desire is to not employ ANY of the above strategies.  My goal is always to get you the best deal possible.  If I see that the home you like has been on the market for 3 months, I know the odds of there being 3 other offers is low, so we would take a more traditional approach and see how willing the seller is to negotiate.  

My best advice is do not be discouraged by rising home prices and the competitive market we are in.  With an experienced agent by your side, you can secure the home of your dreams in any market.

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