HOW TO DEAL WITH MULTIPLE OFFERS
There is plenty of inventory on the market to choose from, writes Heather Faulkner.
Even in a buyer’s market, where there is an excess of listings available, it is not uncommon to end up in a multiple offer scenario.
While looking for a new home this summer, my husband and I offered on two properties and both ended up in multiple bids. Both of us being realtors, we can quickly recognize good value and if the home is a good fit for us, and within 20 minutes we can have an offer written and submitted.
The first home we bid on was on the market only two days, and we felt it was priced appropriately. As there were no offers on the property, we decided to write $10,000 under the asking price. We made that decision with the assumption that the seller would be less likely to move much on his price, being that it was only on the market for two days. We also knew there were several showings booked that day and there was a good chance there may be competing offers. Plus, we have a bit of an advantage in that we have immediate access to two professional opinions of value (our own) about what the property is actually worth.
During the last few years, a few changes have been instituted regarding how multiple offers are to be handled. It is now a requirement that the listing realtor must disclose the names of all the realtors submitting bids in a multiple offer scenario. This new rule is designed to create a more transparent process and reduce the likelihood of a realtor being untruthful about an additional offer (or offers) in the mix.
A few hours after we wrote our offer we were notified of a second offer coming in.
Now we had to “counsel” ourselves, as we do with our clients. In this situation, sometimes it’s helpful to look at the flip side and ask yourself, “At what price would I be OK losing this property at?”
More importantly, however, is asking yourself, “What is the actual value of the property?” You definitely don’t want to unknowingly pay a lot more than market value. This is where you need to rely on an experienced realtor.
Your realtor is going to be invaluable in this situation, helping guide you through some uncertain waters. Your realtor can bring you right into the process, showing you the comparable properties that have sold and how they determine the market evaluation of the subject property.
For some buyers, this can offer some peace of mind making a final decision on the price they are willing to pay.
In our opinion, sometimes it’s OK to pay more than what is determined as market value. If the property ticks all your boxes, you really love it, and you feel you could be happy there for years (or even decades) to come, we feel there is nothing wrong with paying $5,000 to $10,000 more to close the deal.
In a situation like this, in some cases the bank or financial institution may do an appraisal of the property, and if it comes in less than the offered price you may be required to pay some additional money on the down payment to make up the difference.
In our situation we offered $1,700 above list price, which we felt was about $6,000 above market value. We did end up with the winning bid, but we ended up doing an inspection on the property and a number of surprises came up, so we decided it was not the property for us and we walked away.
Even in a multiple bid situation, we strongly advise you still include conditions to the sale, namely an inspection and financing condition. There are only rare instances that we advise someone to consider writing an unconditional offer.
The next day we found another property that had just come on the market, and this time we determined it was underpriced by as much as $30,000. We don’t know why it was listed so low. It could be the listing realtor “missed the boat” on price, or perhaps intentionally listed it lower to garner multiple offers. Sometimes listing under market price can be a great way for a quick sale and getting a great offer close to, or sometimes above, market value. Whatever the reason, the property ticked all our boxes and more, so we wrote an offer right away. This time we wrote $15,000 below asking, as it was priced above what we qualified for.
It’s important not to get hung up on the list price. Mentally it can happen, even to realtors, but the actual value of the property is the most important number. If the property should have been listed higher, it can be helpful thinking of it that way, so when you write an offer above asking you can see the property for what it is.
Maybe the offer is at market value, or even less than market value. This type of approach can help you write a more appropriate offer, which will increase your chances of getting the property you really like, and maybe even at or below market value.
Again, a few hours after we submitted our offer we were notified of a second offer coming in, then a third, and finally a fourth. We knew unless we were able to come up with more money or financing we had almost no chance of winning the bids. We scrambled and were able to increase our offer to $5,000 above asking. Unfortunately for us, we did not win the bid, and someone else will likely end up with the home.
We are no different than our clients when it comes to losing out on properties. It can be quite disappointing to be filled with excitement and anticipation, only to have your hopes dashed on more than one occasion. We again “counselled” ourselves, as we do our clients, that there will always be another property, and maybe one we will like just as much or more.
In some ways it’s a good time to buy a property, since there is plenty of inventory on the market to choose from, so the likelihood of finding one that’s a great fit for you is quite good. And with the market being a buyer’s market, you may be able to negotiate more on the closing price.
For us, however, we are taking a temporary step back while we go on a planned holiday — but I suspect we may not be able to keep ourselves from checking our “hot sheet” of new listings from time to time.
After all, we are realtors.
Heather Faulkner is a Realtor with RE/MAX Real Estate. She works alongside her husband Dennis, and can be contacted with your real estate questions at heather. faulkner@remax.net. Visit her online at www.heathershomes.ca or on Facebook and Twitter @ faulknergroup.