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Lately, the market has been very active, and we have been running into multiple offers more frequently. Being in “competition” is certainly a very different scenario than a “typical” offer situation…but many people are uneasy about competing for a home. It is important to fully understand the multiple offer process, in order to feel more confident if the situation were to arise.
One very common misconception in a multiple offer situation is that it is like an auction for a home, and the highest bidder wins. This is not true at all, in an auction situation, all parties trying to purchase the item are aware as to what everyone else has bid, then they can choose to bid a little more in an attempt to “win” what they are bidding for. In a multiple offer situation when trying to purchase a home, none of the parties attempting to purchase are aware as to what everyone else is offering.
For example, if a home is listed for $399,900, and there are 3 offers on the property:
– The first offer could be for $395,000, because that is what the buyer feels it is worth.
– The second offer could be for full asking price, $399,900.
– The third offer could be over asking price for $408,000.
In any case, none of the parties or their agents are privy to the terms or conditions of each other’s offers. So, nobody will say to you, “we have $408,000 on the table, are you willing to beat that”? That is not at all how it works. With that said, it is important to remember one specific piece of advice when competing to buy a home: Try to put your best foot forward with your very first offer, because you may not get the chance to negotiate, as one offer may be accepted right away. You don’t want to be left thinking that you would have comfortably paid more if you were given the chance to do so.
Lastly, competing for a home is not always about the price. The conditions of the offer can play a very big role in who gets the property. For example, an offer that is “firm” means that it has no conditions at all. An example of such conditions may be financing or inspection. With a conditional offer, the property would be sold on the condition that some specific things are fulfilled. For example, a buyer may have 5 business days to obtain their financing approval from the bank, and to have a home inspection of the property that is satisfactory to them. If for some reason the conditions were not able to be fulfilled, the deposit is returned to the buyer and the home goes back on the market. This is a risk that the seller takes on when accepting a conditional offer. If there are less conditions in an offer, or no conditions at all, it could be very attractive to a seller and they may be willing to accept less money because of it.
This of course is just the basics of what can be involved with multiple offers, they can be very complicated. In any case, it is important to have someone experienced who can give you the right advice. Being prepared is so important, and could potentially save you thousands of dollars. For more detailed information about multiple offers, call or email us at any time.