Are you losing out on multiple offers? If it’s happened repeatedly, you may be hoping for a lucky break. But luck usually has nothing to do with success.
The real estate market in Silicon Valley is a hot seller’s market, and that means that often there are multiple offers, overbids, and sales with no contingencies. This is often the case with homes that sell in 2 weeks or less. Some buyers may get it on the first attempt, but many are bidding over and over – why do they keep losing out on multiple offers?
Over the course of my career, I have noticed that often there is a consistent “spread” of offers. Most of the time, there’s a pack or band of offers at about the same level, sometimes 10% or more over list price, then a couple higher that that, and maybe one or two (once in awhile 3) at the top of the heap in terms of both price and terms which are attractive to the seller.
(There’s a video with my commentary on this below.)
Not everyone is losing out on multiple offers: what are the winners doing?
- The top offer frequently has the highest price and best terms. They aren’t losing out on multiple offers because no one else was willing or able to write such a high, strong contract.
- It is 10-20% over list price or more, 25-30% down at least, and has no contingencies for inspection, loan, and most of all, appraisal (the percentage over has to do with whether the home was priced spot on the value or strategically under). Please see the video below for more on these items.
- The winning offer’s buyers and agent followed directions. Normally that means that they come with all disclosures signed, and the buyer’s agent has even done her or his Agent Visual Inspection Disclosure. They include the proof of funds (all needed) which prove that the buyer can absorb any appraisal shortfall and is prepared to do so. Sometimes the listing agent asks for a particular contract to be used or a particular summary sheet to be filled out. The best agents do all of that. The 2nd tier offers often are incomplete – the listing agents may or may not circle back and ask about missing items, so it’s important to remember that you only get one chance to make a first impression.
- The best offer is also someone who’s been SURE that he or she or they wanted the home from the very beginning and looks ROCK SOLID. NO WAVERING, not a “last minute” offer. Any hesitation on your side will cause the seller to not feel good about your odds of closing the sale. Be consistently interested if you want the sale. A shaky looking buyer may not include their proof of funds. They don’t come across as certain about buying this property and need a few days to see the property again, or show it to their parents, or otherwise confirm the decision to buy. Their agent is not so thorough. If the TDS is not fully signed off, is the buyers’ agent trying to sneak a 3 day right of cancellation into the contract? The best buyer’s offer doesn’t look shaky – it looks dead set on buying the home and has done everything possible to convince the seller of their conviction and competence.
- The second best or next runner up is usually strong on terms (at least 25% down, few or no contingencies) but perhaps made an offer price a little under the top value. Sometimes the next runner up has a good price and mostly good terms, but something is not quite as solid – they didn’t offer to put the deposit into the escrow account the next day, they didn’t check all the needed boxes in the offer, they have a contingency when all the competing bids have none.. If the offers are tied but one buyer has no contingencies and the other has any, that will be the tie-breaker.
- Middle of the pack is usually a combination of a price where the home should appraise, a solid down payment, and few or no contingencies. It may be a price that seems “reasonable”. Buyers may feel that it is “a fair offer” or a win-win. Often the fair offers aren’t good enough to take the prize in multiple offers. If you can project what most buyers think a home will be worth, maybe you might want to consider getting ahead of that pack and seeing where the pricing trajectory will take you. The folks in the middle of the pack are usually the ones, together at the bottom, who keep losing out on multiple offers. (They will say things like “we are cautious…)
- Bottom offers are under, at, or barely over list price, and include an appraisal contingency as well as others (one for loan or one for property condition). If there’s a rent back, they want their PITI covered.
If you repeatedly find yourself losing out on multiple offers, try to see your own pattern in this spread. Is there one thing, or perhaps are there two or more things, you’re just not ready to do?
What do multiple offers look like to the sellers when receiving an offer? Click to view our post on popehandy.com and take a look at a side by side offer comparison sample.