In today's fast-paced seller’s market, an aggressively priced property can often fetch multiple offers, spurring a bidding war between homebuyers. As the seller, this is an extremely fortunate position to be in, but one which may prove more confusing than expected.
It's easy to assume the offer with the highest net profit will be the one to accept, however there are many aspects to evaluate which will contribute to the offer's strength. Here are five strategies to maximize multiple offers on your home.
Ask for highest and best. Once you recognize you’ll be entering into a multiple-offer situation, have your agent notify all buyer's agents to submit their client's highest and best offer by a specific deadline. By doing so, you force all potential buyers to lay their cards on the table and show their hand. They'll view it as a hot property, and be less likely to hold anything back.
But doesn’t this take the negotiation out of it? Only at this point in the transaction, and that’s OK. Negotiating opens up the possibility for a consensus to not be met, and the deal to fall apart. At this point, you’d have to go to the second best offer, which may not be as lucrative, and the buyers would recognize your position is no longer as strong.
Make requests. As the seller, you are the teacher and everyone wants to be your pet. Be clear in how people can suck up to you by tailoring their offer to meet your needs.
For example: If you would like to settle as soon as possible, but will need time to find your next home, have your agent spread the word you’d like a lease-back option. Once the transaction closes, you won’t be forced out of the house immediately, buying yourself time to make your next move.
Request financial information. Have all offers include a document outlining the buyer's financial situation – debts, account balances, job history, etc. Depending on where you live, this may already be a standard practice with all offers.
Throughout the course of the transaction, it's possible you will run into issues. Whether it be an appraisal problem, home inspection items or financing requirements, you want to be as sure as possible the buyer has the means to weather the storm and won’t jump ship at the first sign of a problem.
Compare loan types. When all offers have been submitted, your agent should call each of the lenders involved to confirm a full preapproval has been done and there are no red flags with the buyer. Your agent should also ensure the lender can have the loan fully financed by the settlement date indicated in the offer.
Based on this conversation and the financing information provided in the offer, you should have a clear outline of the type of financing the buyer intends to use. Your agent should be able to provide an explanation of the pros and cons to each option, but here are a couple rules of thumb:
- Cash is king. With an all-cash offer you don't have to worry about an appraisal, settlement typically occurs sooner and the buyer is much less likely to nickel-and-dime you over inspection items.
- Strength in down payment. Not only should you be looking at the type of loan – conventional, Federal Housing Administration, Veterans Association, etc. – but you should evaluate how much the buyer is putting down. The down payment speaks to the financial strength of the buyer, and should there be an issue in the financing process, more money down leaves more loan options for the buyer to explore should he need a backup plan.
Weigh the pros and cons. The ideal way to choose the strongest offer is to lay out a side-by-side spreadsheet comparison to measure the pros and cons. Analyze price, seller credit, inspections, financing, deposit, closing date and any other pertinent information. While some aspects, such as price, deposit and seller credits may be black and white, others may carry more weight depending on your particular situation.
With this in mind, prepare for "letters from the heart." A strategy often utilized by buyers to tip the scales, this is a handwritten letter accompanying the offer describing how the buyers intend to lovingly care for the home, what they enjoy about it, and a little about their situation.
Every seller is different. Some have lived in their home for decades, raised their children there and have nothing but amazing memories. If the buyer fits a similar mold, a letter may very likely carry more than its weight in gold, adding significantly to the pros category.
Should you be of a purely for-profit mindset, don't even open the letters. Keep an objective mindset by focusing on the contract itself.
By finding what carries the most weight for your situation and analyzing all aspects of each offer, you are sure to capitalize on the fortunate situation in which you now find yourself.