Just recently, Rob Kallick, founder of the Los Angeles-based Take Sunset team of real estate brokerage company Compass, had a listing that drew 20 bids. Another brought in 12. The two changed hands for well above the asking price.
“For the house with 20 offers, we probably did 40 showings and half wrote an offer,” Kallick said. “I’ve never seen this before.” The future owner of the three-bedroom residence has offered $ 200,000 more than the asking price of $ 1.4 million, Kallick said. The case ends next week.
In the United States, more than half of agent offers with Redfin real estate brokerage made in June faced at least one competing offer, according to the firm. Auction wars were the most common for single-family homes, with just over 56% of Redfin’s bids contesting other bids. Reception several offers can be a boon for sellers. But it can also be intimidating, as the best deal isn’t necessarily the one with the highest initial price.
“With multiples it can get a bit chaotic,” said Heather Roy, an agent for Douglas Elliman in Beverly Hills. “It’s not always just money. We speak with [sellers] in the time. There is an emotional component. They weigh a lot. Roy advises homeowners to create a spreadsheet to compare offers by purchase price, contingencies and financing terms.
Means of payment
“Money is always king,” said Martha Gundersen, a Douglas Elliman real estate broker in the Hamptons in New York City.
Cash offers are exempt from the usual mortgage requirements, which take time to be approved and come with specific conditions such as inspections and appraisals. This means that cash buyers can execute trades quickly. For sellers, this convenience, however, can come at a cost.
Cash buyers know they have leverage, said Bill Hernandez, who co-leads the Bill and Bryan team at Douglas Elliman in South Florida. They can start a negotiation by saying, “I’ll give you the money to close, but now I’m looking for a 25% to 30% discount. Does business happen like this all the time? No, but sometimes they do.
Cash offers are generally more common in multi-million dollar homes, but even luxury home buyers are now opting for financing to take advantage of today’s record mortgage rates.
When buyers resort to financing, it is often best to consider those who have been pre-approved for a loan, which saves time and ensures that the buyer will indeed qualify for a loan at the agreed price. In addition, the more money a buyer commits to the deposit and the deposit deposit, the stronger the offer.
A down payment of at least 20% of the home’s value creates a sense of security for sellers, even if lenders don’t always ask for it. Not only does this make approval for a mortgage more likely, but a large down payment can indicate that the buyer is financially prepared to meet the unforeseen expenses of the selling process.
Regardless of how they pay, most buyers will require some contingency to get the deal done. These provisions allow the buyer to withdraw in the event of rejection of his loan application, the the rating is low or an inspection reveals major structural problems with the property. Some buyers will tie the offer to their ability to sell their existing home first.
“Too much contingency can kill an offer,” Gundersen said. “The cleanest transaction is the one with the highest price and the least amount of surprises.”
Faced with fierce competition in today’s market, some buyers are forgoing the vagaries of expertise, claiming that they would pay the difference between the bid price and the appraisal if the expertise is low. If they don’t close the gap and opt out of the contract instead, they risk losing their deposit.
“These are buyers trying to differentiate themselves by showing a willingness to go above appraisal and say, ‘I’m not afraid to put in a bigger down payment. I’ll make sure I’m eligible for this loan, ”said Billy Rose, co-founder and president of The Agency.
A strong buyer is also someone who accepts as short an escrow period as possible. Escrow is the time between signing a contract and completing the sale. “The more you are in receivership, the more potential you have for the buyer to reconsider what they’re doing,” Rose said.
How determined is this buyer?
Sometimes a rejected mortgage application or an unexpected job loss can cause a buyer to withdraw from a contract. But often a successful deal depends on the buyer’s commitment. “A buyer can promise the world, but then they get a 70 page inspection report and they’re like, ‘Whoa, you know what, it’s not worth it,'” said Lauren Forbes, co- head of the Los Angeles-based Forbes Corrales Coastal Group at Compass.
Some home buyers write personal cover letters to reinforce their offerings, which gives insight into their reliability as buyers. “We’ll see a beautifully written letter, but then I’ll see the wrong address,” Forbes said. “By that I can tell that they also made an offer on another property. “
A buyer with a few rejected offers can be very determined to make it work, Roy said. “But if they’ve lost 10, you want to get to the bottom of it to see if it’s because of them,” she said.
Some of the things to ask are if the buyer has worked with their lender before, which increases the chances of a smooth financing process and a quick close. It is also helpful to know if the home buyer has any other offers pending, which can show how committed they are to a particular transaction.
“If you think about it, when we have an accepted offer the buyer sort of goes out and the seller is married, locked into the deal,” said Learka Bosnak, who leads the Heather & Learka team at Douglas Elliman with Roy. . “They can’t change their mind about the buyer. But the buyer can go out with someone else at the same time.
In a multi-offer environment, agents say that presenting a counter-offer to everyone ensures fair treatment and allows sellers to get the highest price and the best deal.
“Sometimes people will go above and beyond at the asking price,” Rose said. “Sometimes they’ll use what’s called an escalation clause that basically says, ‘I’ll give you X dollars on top of the highest price you get. “”
A counteroffer should describe the seller’s preferences, such as a sale-leaseback agreement or a shorter emergency period, both of which gained popularity during the pandemic. Sellers can also indicate what closing costs they are willing to incur and what furniture and appliances they would leave behind. Sellers, however, should exercise caution when stating terms. A 10-day loan contingency, for example, can be a daunting task right now, as lenders struggle to deal with the influx of mortgage applications.
“You don’t want buyers to have an unrealistic contract because then they default from the start,” Roy said.
Sellers can also choose to disclose the highest price they have received so far, allowing buyers to adjust their bids. Still, “it depends on the price increase,” Kallick said. “Can you reasonably expect more than that?” Or are you already at a place that is basically a record breaking price? If you go too far, you risk losing all of your interest.
When finalizing a winning bid, sellers should also consider a back-up bid, Forbes said, so that if the first bid fails, they can avoid re-listing the house. Returning to the market after a failed sale can undermine the attractiveness of the property and possibly lead to a low purchase price.
“Right now the market is doing very well,” Hernandez said. “You don’t want to lose an opportunity with a buyer. Because of this, everyone takes a close look at every line on the offer, making sure the deal comes true.