Navigating a Multiple Offer Market
By: Mark H. Stowers
Even with rising interest rates and inflation, the real estate world is still a seller’s market. With low inventory and slowly rising rates, sellers still command the upper hand in getting the most for their property. But just how do you navigate the market when multiple offers are on the table? Buyers’ Agent John Maher offered a few tips to help sellers and buyers understand the art of navigating a multiple offer market.
Navigating a Multiple Offer Market
“It’s very hot for sellers,” Maher said. “There are challenges. It’s beyond the pale of what was being done five, seven or 10 years ago. I’ve even heard people refer to it as a knife fight, which is not pleasant.”
Maher noted “there aren’t a whole lot of cash buyers. Ninety five percent of the buyers are financing a home. These people are not sitting on a whole bunch of cash but today, to get a home financed you still need cash. The seller is looking for as much money as possible.”
With offers starting at $10,000 over listing and moving up, buyers are having to find cash to make their offer more attractive, especially if the offer is more than the appraised value of the home. Buyers have to come up with any amount over the appraised value.
“You’re covering the difference and that’s challenging for a lot of people,” he said. “If there’s a magic bullet, that’s probably a lottery ticket. But people are being creative. People are taking away their inspection contingency but that’s ok for my buyers because I show my buyers what’s wrong with the house. But other agents who don’t have that are hurting their own credibility.”
In helping sellers make the best choice, Maher just presents the facts.
“At that point it gets very black and white. They are going to see a high number and will ask what is the appraisal guarantee because they are getting savvy to that. It usually exceeds expectations. It’s the market, there’s not much you can do except be competitive.”
Maher has seen buyers work with relatives to get a “gift” that they can repay in order to meet the selling price. He also steers his client towards previous clients but in the end, it’s the number the seller wants for their home.
“A lot of people are coming from an HGTV experience and want the perfect house. But if you don’t have the cash available you may have to settle under that standard you are accustomed to. What’s going to happen is that we’ll see an uptick in interest rate and you’ll see buyers who are a little more hesitant and properties staying on the market longer. Then it will balance. It will definitely fluctuate but it’s a long cycle.”
To help creativity, Maher suggests offering an appraisal guarantee.
“The seller agrees to bring the difference in cash between the appraised value and what we’re offering,” he said. “Properties that have been jacked up may appraise higher now that properties are selling higher. There’s also escalation clauses which basically means I’ll tell a seller, I’ll go $1,000 or higher over the next best offer but I can’t exceed x amount of dollars.”
Inspection periods can be eliminated, offer a fast closing and more.
“We are trying to get as much inventory as possible because we need the market to be functional,” Maher said.