Competing offers is a term that is often used in a hot real estate market. You might find yourself in that situation so it’s best to understand the process before you’re in the hot seat.
What are competing offers?
In a seller’s market, a desirable and reasonably priced home may end up in competing offers. This is when more than one potential buyer is interested in and submitting offers on a property. When in a competing offer situation, the buyer will often be required to pay above the list price for the home to “outbid” other buyers.
What causes competing offers?
Competing offers happen in a busy market when inventory is low. Demand is greater than the supply said another way, there are more buyers than homes (or good homes) available. Competing offers may also be caused by underpricing a property.
How do I write a strong offer?
- Minimal terms and contingencies – You want the offer to be as simple as possible. Don’t ask them to repaint the living room or replace the carpets. Things that take time and money are likely going to detract from your offer.
- Deposit – a larger deposit gives greater confidence to the seller and helps solidify your ability to finance the property.
- Possession – Communicate that this is flexible or have your Realtor ask the sellers’ Realtor what is ideal for the buyer.
- Conditions – as few and as fast as possible. Few conditions mean the less likely the offer will fall through and a shorter condition period gets the sale done faster.
- Financing – If possible, don’t include a financing condition. But if it’s required, include a pre-approval letter from your lender to help ensure the seller that this is just contingent on the home appraisal and not on your qualifications. If pre-approved (which you should be at the point of writing any offer), an appraisal condition may be a better option.
- Inspection – if possible, have an inspector on standby. When the market is busy, so are inspectors and they may not have any availability. If it’s a condo, check appliances and under the sink during your showing and consider skipping the inspection as structural items are usually covered under the condo corporation. If your Realtor has a thermal gun they can bring, that’s an added bonus!
- Sale of buyer’s home – this is a no-go when it comes to competing. If you need to sell in order to buy, do that first. At a minimum, have your home conditionally sold so it is only conditional to a firm sale of your home. It is almost a certainty that a seller will not accept an offer conditional to the sale of a buyer’s home condition as that means they may miss out on other potential offers.
- Price – the price is obviously the most important factor. There are a few things to consider. Especially on a newly listed property, expect to go above asking – sometimes upward to 10% above asking.
- Unconditional – if you’re able to submit an unconditional offer, this is a very strong position and a seller may accept this over a slightly higher priced offer as it is a guaranteed sale, there is no going back for the buyer.
Positioning your offer:
When competing, the agent doesn’t know the price, terms, or conditions of other offers. That’s why it is important to provide the strongest offer possible.
The seller’s agent will tell you when they are presenting the offers to the buyers. It is often best to have your agent wait until an hour of presentation time to call the agent and ask how many other offers they have received. The more offers the stronger you’re needs to be.
Additional ways to position your offer are to include a pre-approval letter and a personal letter to pull on the seller’s heartstrings. This can include pictures of your kids, why you love the home and the area, and other emotional or sentimental reasons they should pick you.
Although the seller has several offers to choose from, they do not have to accept it as is, they can still negotiate with you.
Competing offers are not for the faint of heart. You have to be prepared to be aggressive, to compromise, and possibly not get the home at all. Be prepared to manage your expectations and when searching for a home that is in the market sweet spot, you may have to do this multiple times until you win. It’s stressful but worth it when you find a new home!