There aren’t enough listings to meet buyer demand in many markets and price ranges, so buyers can expect to compete. In the greater Tampa area, entry-level and moderately priced homes are in especially high demand so buyers in these brackets should be prepared for multiple offer situations.
Many people think in terms of broad offers and counter-offers where parties eventually meet in the middle. That seems to work well when buying used cars (at least on TV) with the seller offering for $12k, the buyer coming back at 8k, and the two parties eventually agreeing on splitting the difference at $10,000.
That’s not the case in this real estate market and if you go into a multiple offer situation with that strategy, you will waste time and lose bids on potential homes.
Realtors® know that in a healthy market, it’s best to price at or just below a home’s value in order to bring the most buyers and increase the chance of multiple offers.
In those scenarios, the winning bid will be close to, or even above asking price. And competition will be tough. The following guide will help you put your best foot forward in a multiple offer situation:
- Get a strong pre-approval with documentation. This is a must in any market, but it is absolutely crucial in a competitive market. Your offer is not worth the paper it is printed on if you don’t have documentation to prove your funding to the seller. The stronger that proof, the better.
- Don’t wait. Entry level homes are likely to have a flood of buyers coming to view and multiple offers to choose from. If you want to offer for the house, you'll have to be prepared to submit your offer quickly, within the offer deadline.
- Offer your highest and best on the home. In a multiple offer situation, buyers will not have the luxury of a counter-offer. Sellers will choose the best offer, so it's very unlikely that you'll get another chance. Regardless of the asking price (sometimes, they are intentionally low to bring the most buyers), your offer should reflect the market value of the house and the most you are willing to pay. It's also helpful to consider what your alternative options might cost you. If you've been looking in the $225k range and find a home listed at $189k that's worth more and there are multiple offers on the table, offer over the asking price. (Don't get caught up, though. Determine the value, consider your budget and decide accordingly; not in a frenzy.)
- Pay your own closing costs if possible. When asking for closing costs, that money directly affects the seller’s bottom line and reduces your net offer. For example, offering $200,000 and asking for $5000 toward closing is only a net offer of $195,000. It also comes with a few other possible challenges. Learn more about asking for closing costs here. Bottom line: Ask for as little as possible in closing costs (often, it should be $0) in order to strengthen your offer during a multiple offer situation.
- Inspection period. The standard FAR/BAR As-is contract defaults to 15 days for inspections. During that time, the buyer can leave a contract for any reason, so it is a risk to the seller. A stronger offer will have as short an inspection period as possible. Seven is a good time frame as long as you know that you can get an inspector out there ASAP.
- Don’t ask for stuff. If the seller is sitting on multiple offers, they are unlikely to choose an offer that makes their lives harder. They want an offer with a strong source of funds, as few concessions as possible, a close closing date and basically, the one that makes their lives easiest. Now is not the time to nitpick.
- Funding source is a big deal. Cash is king and will win in most scenarios as long as the offer is in the ballpark with the others. After cash, a conventional loan is much preferred and accepts more. I’ve encountered buyers who qualified for conventional loans, but the loan officer tried to put them into an FHA from the beginning. If you can get a conventional loan (they start with only 3% down), then do that. VA and FHA loans are significantly stricter in their requirements for home condition. They are great loans. However, in a multiple offer situation, this is the basic pecking order of financing, all other things being equal. Do your best with the other aspects in your control in order to have the best chance.
- Be flexible. Have your Realtor® reach out to the listing agent before writing your offer to see if there’s anything the sellers want besides price. Do they have a preferred closing date? Might they need to lease back their house for a couple of weeks to give them enough time to close on their new home? Offering to meet needs like these could give your offer an edge.
- Offer on a less popular listing. If you’ve been striking out because of your financing or other elements outside of your control, you may have more success with less competition. There are any number of reasons for why a good home might have less competition, such as poor pictures, challenges for showing times or minor cosmetic issues.
- Write a "Dear Seller" letter. Beyond dollars and cents, homes are also connected to emotions. Especially if there are multiple offers, many of which will be very similar, a well-written letter can help your offer stand out from the pack. Some items to include in your letter would be recognition of the seller's care of the home. If something they've done there really stands out, mention it in particular as it may likely be a source of pride. Also include a strong "why" for what you wish from your home -- that enthusiasm and hope can be very persuasive. An accompanying picture is also a nice touch!
Also keep in mind that your first home doesn't have to be your forever home. The Tampa real estate market is a great market for purchasing homes in steps, because the advantages of your first home will help you achieve your step-up home. Get a great home for now. There's plenty of time and opportunity to upgrade years down the road.
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