What does a typical week in a multiple offer real estate market look like for a buyer right now?
Wednesday/Thursday
The vast majority of listings are hitting the market. Your online search tool is blowing up your phone. You’re elated. This one looks great! Or this one. Or maybe this one? You imagine throwing dinner parties and summer BBQs in your new home. You envision trips to the nursery for all the colorful bulbs you will plant along your front walkway.
Friday/Saturday/Sunday
You work with your Realtor to set up as many tours as possible. The appointments are filling up quickly. How many other people are looking to see this home? Should we skip this one? Will it be too “hot” a home with multiple, multiple offers? You and your Realtor visit Open Houses together throughout the weekend. Wait what? Your Realtor isn’t offering to attend open houses with you? Why not?! Sure some buyers like to shop solo. But isn’t having a trained eye seeking items you may overlook super valuable given how tight inventory is right now?
Sunday Night
You line up the homes in the order that you like them. But we have other ideas. We line them up in the order that offers are due. This way, we can write as many non-overlapping offers as possible, giving you a greater chance of securing a home.
This one has offers due Monday morning with a decision due by Monday evening? Perfect. They are first. But this other one, the one you like better? They are asking for offers due Monday evening with a decision due by the next afternoon. And this one? You’re in luck! They are not asking for offers until Tuesday at noon. Here’s the thing. If those Monday evening folks have not contacted you by noon on Tuesday, they’re talking to someone else. So now there are three possible offers you can make in a single weekend. In a perfect world, maybe a seller will counter, creating a delay in which you may hear from your preferred home. Anything is possible in real estate.
Monday/Tuesday
You submit non-overlapping offers and hope to win this week’s home lottery.
And on Wednesday, it starts all over again. This is an exhausting state to maintain. And many buyers are riding this roller coaster for weeks and months on end. When does it end? When inventory and/or interest rates increase.
So what are the components of your offer that can help you stand out above other, multiple offers?
As a buyer, you have a plethora of tools at your disposal to help you, including your buyer’s agent. As an Accredited Buyer’s Representative, I have additional training and steadfast fiduciary commitment to you and your purchase. Your buyer’s agent’s ability to forge fast relationships with listing agents in this market is of tremendous value to you. Everyone wants a deal to close. Ensuring the listing agent of our professionalism and proven track record, your love of the home, and your lender’s ability to meet deadlines goes a long way to helping you land on top.
Price
If we are being honest, many successful offers come down to price. But we have been around long enough to see sellers choose not always the highest offer, but the strongest offer. Offering a whole lot of money but then zero guarantees about the appraisal process can backfire. How do you determine what is a good, solid price? We help you. We will check this home against other recent sales to determine where the home is likely to appraise, keeping in mind the age of the comp sale, and the rapid rise of the market. You better believe the seller knows these numbers too. So any offer over and above recent comparative sales needs to be further guaranteed in order to be the strongest offer.
In this current market, given how much over list price buyers are willing to go, we usually ask our buyers to consider the recent comps, consider their ability to “bridge” their offer price to a lower appraised value, and then consider a number that, should another buyer come in higher than that number, they able to walk away saying, “We gave it our best, good luck with your new home” to the other buyers. That number exists, and it is different for each home depending on how many trade offs you are sacrificing for a particular home.
Appraisal Bridge
This is a great “sweetener” to help solidify and strengthen your offer. Of course it is only available if you have the cash to do it. What you are saying is we will pay you X for your home. We understand it may not appraise for X. Rather than cause a low appraisal to force a renegotiation of price, or a sale fail, we commit to bridge the difference between our offer of X and the appraised value. Some buyers will bridge the entire gap (essentially waiving the appraisal, even if the bank requires an appraisal), and some buyers will bridge the gap up to certain amount of money.
Does an appraisal bridge mean we are overpaying for the home? If the home appraises for less money than your offer price, it does, yes. In a rapidly rising market, however, the market often catches up to that overpayment in a matter of months. Meaning that if you miss out on purchasing that home, you may add more months of house hunting to your life, and if it takes you a few months to find a home, the likelihood that the prices are now where you would have offered originally, plus expecting you to over bid yet again…it’s a hard dragon to chase.
Proof of Funds
We recommend you work with a lender who will provide you with a proof of funds letter that is crafted to your specific offer. We never want a seller to know there is more money on the table, and we want them to be confident that any offer to bridge an appraisal gap is made with the full support and knowledge of the lender.
Earnest Money
Earnest money is a portion of your total down payment. It is money you plan to put toward your purchase. In a normal Portland market we usually see between 1% – 1.5% earnest money offered. In this market, however, anything goes. We recommend that a client keep their earnest money below $10,000, the threshold for small claims court vs circuit court. At higher purchase points, however, that is not always possible.
In addition to offering a larger amount of earnest money, you can make the earnest money non-refundable. You determine at what point you want the money to become nonrefundable when you craft your offer. At offer acceptance? At the close of the inspection contingency? After a certain number of days?
While we do not recommend it, you can also choose to release your earnest money funds directly to the seller after a certain period of time, usually after the inspection contingency. This can be a risky maneuver. Sould anything happen to the home while it is in escrow, your earnest money is gone. No one expects house fires or natural disasters. Some buyers are willing to risk it to win, however.
Total Down Payment
If you are not a cash buyer, the amount of cash you bring to a financed transaction can distinguish you. The more cash a buyer brings, the lower the risk for the bank. The appraiser feels less under the microscope. And the seller feels more comfortable that a smaller loan is needed for the purchase of the home.
Inspection Period
As the buyer, you can select the length of the inspection period, or waive it entirely. I never recommend waiving the inspection contingency. You should have time to conduct an inspection at the very least to assess health and safety concerns. In a hot market, a common strategy is to request no repairs or limit your request only to health and safety concerns.
Closing Flexibility and Seller Rent-Back
One of the big reasons for our current lack of inventory is the sellers’ fear of being buyers. No one wants to be houseless while competing in the same multiple offers landscape you have been slogging through. As a flexible buyer, you can quell that fear by offering a favorable closing schedule. You can also offer the seller rent back of their home after the close of escrow for a period of time, up to 60 days.
In Portland, many buyers are sweetening that deal by offering those 60 days for free. This rent-back period gives the sellers time to make non-contingent offers. It also gives them peace of mind, and saves them the hassle of moving out, finding temporary housing, etc. A flexible buyer is a more likely to be successful buyer.
Buyer Love Letter
These are quickly falling out of favor. Indeed, in 2021 Oregon legislature passed a bill expressly indicating that a listing agent has no obligation to pass these letters along to the seller. The bill reads, “In order to help a seller avoid selecting a buyer based on the buyer’s race, color, religion, sex, sexual orientation, national origin, marital status or familial status…a seller’s agent shall reject any communication other than customary documents in a real estate transaction, including photographs, provided by a buyer.” More and more listings are appearing in RMLS with private Realtor remarks letting us know that no love letters will be accepted or passed along to the seller. Tugging at heart strings will be a more difficult venture in the future, at least in Oregon. So utilizing a combination of some of the strategies outlined above are more likely to lead to success.
Moving to Portland? Or already here? We are Here to Help
Danni Duggan, Dana Smith, and Charles (Bud) Garrison, OR Brokers, Premiere Property Group, LLC
Danni: 503-719-2279 | danni@dannipdx.com
Dana: 503-805-0569 | dana@dannipdx.com
Charles (Bud): 503-679-1893 | bud@dannipdx.com
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