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Winning a Multiple Offer Situation in Southern California
(Updated 8/22/09) In a very hot market ... or even just a very good one ... you may have only one chance to buy the home you love. Make your HIGHEST and BEST offer your first offer! And, do it quickly! Listen carefully to your Realtor's advice. In today's hot and wild Short Sale and Repo market, Listing Agents often set the listing price well under the current market in an intentional effort to encourage bidding up on the price. And, it usually works! Especially in Riverside and San Bernardino Counties where the prices are lowest. It is not unusual to have 20-30 offers on one property although most have less. In general, a property in good condition will have many more offers on it than one that is pretty trashed! And, sometimes you CAN buy a property under list price! Bank Repo Listing prices are generally more realistic as the bank sets the minimum price ... but they are bid up also. The Bank ultimately sets the price on a Short Sale property ... not the Listing Agent. They do an official appraisal. So make your "Highest and Best" offer in line or just a bit above the recent closed comps in the area no matter how low the List price is. Don't go too high or it may not appraise. Your initial offer may, wisely, be at or over list price even if it is a brand new listing, you are the first one to look at it and you know of no other offers at this time! Most decent listings, in good locations, will have multiple offers within the first few days. The Seller knows this too and may delay hearing offers for a few days. The Seller may hear yours right away ... you never know. If you decide to offer over list price ... do not raise the price in predictable increments. If the home is listed at $359,500 ... offer $360,600 (or $380,400!) and not $360,000 as others probably will do. That $600.00 could buy you the house! Of course, it all depends on the property, the current closed comps and how many offers are on the table. Homes often sell for many thousands over list price. The Listing Agent is ethically obligated to advise your agent when another offer comes in. Sometimes they don't and you have to keep checking. You may want to revise your price again at that time depending on what information your Agent is able to obtain. Again, it depends on how much you want the house. Make your offer as totally clean as you can. If your offer is contingent upon your present home closing escrow, you will probably lose out to another Buyer whose house has already closed escrow and money is in the bank ... even if he offered less than you did. Put down as big a down payment as possible. The higher the down payment, the better the chances the loan will go through and this makes points with the bank. Try and avoid a counter offer from the Seller. Make your Good Faith Deposit as high as you can. Minimum deposit should be 1% to 1.5% of the purchase price and the more you deposit, the stronger you will appear. Title and Escrow companies are always Seller's Choice in a multiple offer situation.. If you feel comfortable doing so, waive the Appraisal contingency. This may mean that you may have to increase your down payment by the difference between appraised value and purchase price. Not a decision to be made lightly. The appraisal factor is very important here. Know the comps! The Seller does. Do not offer more than the property can reasonably appraise for unless you want to waive that contingency. You can raise the Bank's bottom line in other ways. Do not ask for closing costs or repairs or Home Protection plans. Offer to have the termite clearance done at your expense. Consider paying some of the SELLER's costs. The competition can be that intense these days!! You can also decrease your inspection period to less than the traditional 17 days ... probably without much risk to your peace of mind, while gaining stature in the Seller's eyes. The Banks will probably reduce it to 10 days anyway. Banks sell their properties in "As Is" condition and generally will make no repairs. The inspection is for your information only. Have your lender write a personalized, glowing "Pre-approval" letter citing exact credit scores. You will probably beat out other Buyers who are only "Pre-Qualified". A cash offer will probably win over all others ... but not always. Sometimes the decision between similar offers is made on the basis of FICO scores alone. Banks usually want as short an escrow as possible so make sure your loan is well along in the process. Sometimes, there are per diem penalty charges imposed by the bank if an escrow is late in closing. Dealing with a bank is a very cut and dried process! The "Bottom Line" and the strength of the Buyer are all that matter to the bank. Some banks will pay a portion of the Buyer's closing costs but you may have to up your offer to compensate and this may exceed the appraisal limit. Again, they are looking at the "Bottom Line". Active listing inventory is very low ... and Buyer activity is high and very competitive. Your Agent should have discussed most of these topics with the Listing Agent prior to writing the offer. Listing Agents on Bank properties are so busy today ... they are often hard to reach. The whole idea is to give the Sellers exactly what they want and more! Try and think of anything you can do to make your offer stand out from the others. Finally, Make sure that the offer package is totally complete when submitted. The specific requirements for each property are usually set out at the bottom of the MLS listing under "Private Remarks". If a listing agent states that the pre-approval must be from a Direct Lender (a major bank) don't try sending in a prequal from a Mortgage Broker .... your offer will not be submitted. Sometimes, a listing requires that you pre-qualify with a specific entity in addition to the Prequal you already have. They are not kidding! If they ask for the first two pages of the credit report, showing Ficos, provide them! An increasing number of "Equity or Regular" listings are now appearing on the market ... the Seller has enough equity to sell and pay his own costs! These often have multiple offers also. However, they do not get as much attention as the Bank owned homes and you may be able to negotiate a bit. Offering on these properties is a more personal affair. You can write a letter to the Seller telling him how much you love the house when you submit your offer. He will probably look at it and it might tip things in your favor! Equity Sellers may pay closing costs, give carpet allowances and make repairs. But the "Bottom Line" is still the most important in a multiple offer situation. If there are many offers on the table, do not ask for anything back in closing costs or other items. See above suggestions. No matter how hard you try and make your offer perfect ... The Seller may wind up countering your offer. You will know, by a special box checked on the counter offer form, whether the Seller is also countering other offers. He may counter one and not others. The counters may be different from each other. He may accept one offer and reject the others. Listen carefully to your Agent's advice at this point. If multiple signed offers come back to the Seller, he has the right to choose between them and decide who buys his home. This is where all the points discussed above can really work in your favor! ******************************************************************* Thank you for visiting my Website! I hope you found this report helpful, informative and interesting! It is of my own composition and based upon my long experience in Real Estate! I can make you a Winner! Please contact me with any questions you may have. Marlene Prescott Prudential California Realty 714 283-6643 marlenepre@aol.com |