Multiple Offers During Home Purchase
How much should you offer when you know there are other interested buyers?
- Your lender will base your maximum loan amount on the appraised value or purchase price, whichever is lower. So you can’t offer more than the property value.
- If you can’t pay cash, get a preapproved mortgage and attach your approval to your offer. So the seller sees that you can close the deal.
- Make a clean offer with few or no contingencies if possible.
To compete with motivated cash buyers, you may have to offer a little more. Just make sure you can afford the mortgage. And don’t get caught up in the bidding and overpay.
Home sellers do not always go with the highest purchase offer. When faced with multiple purchase offers, sellers understand that they can only go so high. This is because if the home does not appraise out, the chances are they will have to reduce the price. It’s at these times that it pays to build a friendly relationship with the seller and the seller’s realtor.
If there is a chance to meet the seller of the home, asking questions about the neighborhood and the home may convey a sincere interest in purchasing the home. Discussing similar interests, such as parenting and pets, can also break the ice and create opportunities to strengthen the buyer’s position over less considerate buyers.
A letter of introduction added to the offer could help sway a seller toward a buyer, even if they have a weaker credit profile or lower purchase offer. It’s okay to talk about more personal issues as well as topics like the school system, park district, and other local matters.
Role of the Seller’s Agent in Multiple-Offer Purchases
The seller’s realtor has a big influence on which buyer’s offer to recommend to the seller. Establishing a friendly relationship with the seller’s real estate agent is helpful in this case. The idea is to make a positive impression on the seller’s realtor that the buyer will close on the home. Even encourage the seller’s realtor to contact the mortgage loan originator, providing the loan officer’s contact information as well.
Making a Reasonable Offer
Making a reasonable offer on a home that already has multiple purchase offers is not as hard as it seems. Recognizing that many home buyers tend to bid higher than the listing price of the home in this situation. But doing so can create future problems if the home does not appraise out – and home sellers realize that.
It’s valuable to heed a realtor’s advice on how to end up with the successful bid; but generally speaking, it helps to offer full asking price and then strengthen the offer in other ways.
Home sellers want to go with the home buyer that presents the most solid offer. So it should have very few contingencies on the home purchase contract, for example. Many home buyers with excellent credit and income profiles may offer a no mortgage loan contingency which will definitely show the strength that the home buyer will definitely get a mortgage loan. Large earnest money is another way to show strength as a home buyer. A solid pre-approval letter with a large down payment also shows strength as does little to no mortgage contingencies.