Multiple Competing Home Offers By Buyers In A Sellers Market

Multiple Competing Home Offers By Buyers in a Sellers Market

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers multiple competing home offers by homebuyers in a seller’s housing market. Multiple competing home offers are becoming increasingly popular due to rising home prices. There is more demand for homes than the inventory of housing throughout the country.

Rising home prices seem to force many first-time homebuyers out of the market. In 2020, the historically low mortgage rates were among the largest factors driving skyrocketing home prices. However, mortgage rates, inflation, and housing prices skyrocketed. Rates is expect to continue to rise and so is home prices.

Mortgage rates are expected to remain volatile at these high rates. 30-year fixed-rate mortgages are at 6.87% for prime borrowers. The resurgence of non-QM loans is expanding the buyer’s market. Many self-employed wage earners utilize bank statement mortgages, asset-depletion, non-QM jumbo mortgages, and other non-QM and alternative financing mortgage programs.  In the following paragraphs, we will discuss how to tackle multiple competing home offers and get the winning bid on the home purchase.

Historic High Rates Not Making a Dent in Housing Demand And Prices

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Home prices have gone up throughout the United States. Home values have increased double digits yearly since 2013 in many parts of the country. In 2020, mortgage rates hit the lowest since the 2008 Great Recession. The FED dropped interest rates to zero percent to damage control from the coronavirus economic crash. A year later, mortgage rates are nearing 7.0%, and inflation is surging. However, the housing market is still on fire and booming, says Ronda Butts, a dually licensed realtor and loan officer at Gustan Cho Associates. Ronda adds the following statement:

The Federal Reserve Board dropped interest rates to zero percent plummeting mortgage rates to historic low levels back in 2020. Within a year, mortgage rates started skyrocketing where today, rates are at 6.875% and seem like it will break the 7% market in the coming days.

Home demand remained very strong despite the economic damage the coronavirus outbreak caused.  There is no sign of a  housing correction. The housing market forecast 2023 is expected to remain strong, if not stronger, with mortgage rates still at historic level. The FHFA, Federal Housing Finance Agency, increased conventional loan limits to $726,200 for 2023. This was the fifth increase by FHFA due to rising home prices for seven years. HUD, the parent of FHA, increased FHA loan limits for three years in a row for 2023 to $472,030.

2023 FHA Loan Limits is set at $472,030

Winning Multiple Competing Home Offers In Seller’s Housing Markets

Many home buyers get discouraged when bidding on multiple competing home offers situations. They often wonder whether or not it is worth it. It is not for home sellers to get over a dozen of multiple competing home offers in a seller’s market. Dustin Dumestre, a senior loan officer based in Salt Lake City, Utah, explains the meaning of a sellers housing market:

A seller’s market is when there are more buyers than the inventory of homes. Home buyers should always put their offers in when there are multiple competing home offers. The highest bid is not always the winning offer on multiple competing home offers.

Someone will get the winning offer, and why can’t it be you? There are many tricks of the trade in winning a bid on multiple competing home offers. And it does not need to be the highest price. In the following paragraphs, we will cover strategies to help you with the winning bid when you encounter multiple home offers.

Earnest Money Shows Buyers Have Skin In The Game

Earnest money is very important. Earnest money shows that the buyers are serious. Larger earnest money deposits show sellers that buyers have skin in the game. To show that you are serious, offering large earnest money with no contingencies may get you the winning bid. This means if the deal does not close, the sellers get to keep the earnest money. 

Show The Strength Of Pre-Approval

 36/5000 How to offer incentives to sellers

There are instances where home buyers’ mortgage loans get denied because loan officers did not properly qualify home buyers. This is every seller’s nightmare. Sellers prefer cash buyers. Unfortunately, most home buyers need to obtain a mortgage. Show the sellers that you have a solid pre-approval. A TBD Underwriting Approval stands out and shows strength. TBD Pre-Approvals are loan commitments where borrowers already went through processing and underwriting. The only condition left is underwriting the property and obtaining a home appraisal. 

Multiple Competing Home Offers And Offering Incentives To Sellers

Offer the sellers that you can delay obtaining possession of the property after closing. This means sellers have time to move out of the home after closing. Buyers may not have immediate occupancy, but it may be a great way of getting the winning bid on a multiple-completing offers situation. Home buyers have ten days of home inspection contingencies. Buyers also have mortgage contingency timelines.

If you are dead set on the house and have a solid pre-approval by a reputable lender, you may want to waive the home inspection or mortgage contingencies. Offer to pay for the bridge between the appraisal and purchase price if the home does not appraise. You may want to offer the best price you are willing to pay, even if it means above the sales price.

Remember that price is not the only factor in getting the winning bid on a home with multiple offers. There is no set formula for getting a winning bid. A solid pre-approval letter plays a positive role in the negotiation process. Strong earnest money strength provides the strength of the borrower. See if you can take out contingencies such as earnest money contingency. Fast closings are another positive negotiation term. You may want to offer time for the sellers to move out of the home after it closes.

What Is a TBD Underwriting Pre-Approval

In a seller’s market, sellers prefer cash or home buyers with loan commitments. Have your lender give you a TBC Underwriting Approval versus a pre-approval signed by the loan officer. A TBD underwriting mortgage pre-approval is a loan commitment issued by the lender. The underwriter will underwrite the whole file except the subject property, says Ronda Butts, a dually licensed realtor and loan officer at Gustan Cho Associates:

A TBD Underwriting Approval is a file that has gone through the mortgage underwriting process and the underwriter has signed off on the borrower. The only thing that is missing is the subject property. Once the homebuyer has chosen a subject property, the underwriter then underwrites the property after the home appraisal.

Once the appraisal has been underwritten, the underwriter will review the borrower’s updated documents and issue a clear to close. All these positive factors create ammunition for the buyer’s negotiation leverage toward the homebuyer’s favor in getting the winning bid.  It is up to negotiations between buyers and sellers. Hiring an experienced real estate agent with years of experience is very important. The real estate agent will be the key negotiator with the listing agent.  

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