It is a common misconception within real estate that the highest monetary offer wins out in multiple offer scenarios. This may be the case in arguably the majority of the cases however there is still a significant number of times that the having the highest offer is not enough. In fact, there are a lot of factors that play into a Sellers decision to accept an offer and while it may sound shocking to most, the money being offered is not always the bottom line. Prudent buyers should walk into multiple offers with the knowledge of what could influence a seller to accept a price lower than the highest offer.
1. Timing:
Customizing the length of the closing to suit the seller’s needs can often help seal the deal over a higher offer. Sometimes the seller needs a longer closing to accommodate their move if they have not found their next home. This is particularly true in a Seller’s market where they have to factor in the time it may take them to a home suitable to their needs. The sellers are aware of the likely competition they will face during their own search and will want to make sure they’ve given themselves enough time. They may get turned off from your offer if they feel pressured to move out sooner without a new home to move into.
On the other hand, the sellers might be looking for a quick closing. It is important to note that closings can happen within a week of having a firm offer accepted as long as the lawyers have been given ample time for conducting a title search. This is particularly true for vacant homes. The vacant home may have been an investment property or perhaps the Sellers have moved into their next home already. The savings and convenience gained from off-loading a vacant home can often have greater value to the Seller than simply the price being offered. It is important that your Realtor is aware of the sellers timeline so that your offer can meet their needs.
2. Deposit:
For a contract to be valid, there needs to be consideration from both parties after acceptance of an offer. The seller’s consideration is the agreement to not sell the home to anyone else. Whereas deposits are an essential element of any contract as it is the consideration from the buyer. In other words, a show of commitment. There are two ways in which a deposit may influence the Seller to accept a lower offer.
First way in which a seller could be influenced is how you choose to submit your deposit. There are two methods of submitting a deposit for a property. The deposit can be submitted “upon acceptance” or “herewithin”. Upon acceptance usually means that the deposit is due within 1 business day of an accepted offer unless agreed upon otherwise. Herewithin implies that the buyer is willing to submit a deposit along with the offer itself. A buyer submitting their deposit along with their offer may be the deciding factor in a multiple offer situation where the offers are close in price. Submitting your deposit with your offer shows the seller that you mean business.
The second way a deposit may sway the deal your way is by having a larger deposit sum than competing offers. The deposit is applied to your purchase price on closing so often it is a matter of having enough liquidity for prospective buyers. However, for a Seller the deposit protects them in the case of non-performance on the end of the buyer. If the deposit is higher, it reduces the Seller’s need to pursue the buyer for damages after non-completion as the deposit may be enough to cover damages. But remember the deposit is a show of commitment from the buyer and submitting a larger deposit than the competition will really get you noticed!
3. Conditions
Conditions or Contingencies are there to protect one or both parties, allowing them to withdraw from the agreement without penalty. The most common contingencies – inspection, financing and appraisal, are all in place for the sole benefit of the Buyer. If you’re in a multiple-offer situation for your dream home, you will want to go in with the cleanest offer possible. A clean offer means that you have no conditions and that you are willing to accept the home in an as-is condition.
A firm offer is obviously riskier for the buyer as there is no protection for them if their financing falls through and they are willing to take-on a lot of the problems that the home may have unknown to the Seller or their agent. However, there are steps you can take to mitigate the risks. Firstly, it is prudent to always ensure that you have been pre-approved before you start your home search. This will save you from potential heartbreak and/or severe financial losses. By entering the real estate market without knowing your affordability you are setting yourself for failure. Another way of protecting yourself is by conducting a pre-offer inspection. This will allow you to go into the offer presentation fully aware of all the quirks and flaws of the home. If you don’t feel comfortable submitting a firm offer, try to ensure that the conditional period is as short as possible. Make sure you have kept your mortgage provider and home inspector in the loop of the time constraints you are working with.
4. Story:
Buying is an emotional decision as much as you may tell yourself otherwise. The decision to buy is based on emotion and the rationalization of it is with logic. Selling can also be an emotional decision. Sometimes, the Seller’s most important consideration is not the amount they will be taking home but rather who will be inheriting their home. They want to know that the next occupants will cherish the home as they have. It may seem cheesy but submitting a heartfelt letter and photo along with your offer can help you stand out from the others, especially if the seller has lived in the home for many years and the move is an emotional one. Often sellers will melt upon reading a letter that explains how the home spoke emotionally to a prospective buyer. This is an inexpensive strategy of standing out to a seller with a strong connection to their home!
The Moral:
A prudent Realtor will protect your interests while simultaneously advising you on the best strategy for getting your dream home. It is important that you, as the buyer, understand the Seller’s motivation as well as emotional triggers. That way you can tailor your offer to suit the seller’s needs and maybe even save yourself a few bucks.
