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Multiple Offer Strategies for Buyers

Austin Callison

My experience goes as far back as my upbringing in a small ranching community in Northern California...

My experience goes as far back as my upbringing in a small ranching community in Northern California...

Mar 30 7 minutes read

How do I compete in a multiple offer situation?

Currently, the buyer demand for housing in our local market exceeds the amount of inventory of homes for sale. This often results in multiple offer situations and offers being presented above the asking price.

Below we will go over some of the common negotiation tactics used in multiple offer situations.  Many Buyers are using these strategies when they present their purchase agreements so that they can stand out above the numerous others the Seller is reviewing. However, there are potential risks to the Buyer for each approach that the Buyer should be aware of.

Waiving Inspection Contingencies

This strategy is attractive to Sellers because they do not have to invest any future money into repairs before closing.

RISK:  If there are any major repairs needed or structural issues the Buyers have no recourse. They would need to proceed with buying the property AS-IS.

Waiving Appraisal Contingencies

Using this method is also very appealing to Sellers. Many purchase agreements have a clause that if the property appraises below the purchase price the buyer can walk or the Seller has the option to sell the property at the lower appraised price.  With many properties selling for thousands above the asking price, waiving this contingency means the Seller does not have to worry about this scenario coming into play.

RISK:  The Buyer no longer has the option to negotiate the purchase price should the appraised value come in significantly lower. Additionally, if the Buyer is using financing to purchase the property, then the Buyer has to come up with the difference in cash. The Buyer should also check with their lender to make sure this does not affect their ability to secure their final loan approval. Besides the loan risks, if Buyers use all their cash to purchase the property they lose out on other intended purposes for their savings such as future home upgrades, purchasing new appliances, or moving expenses. 

Making Earnest Money Non-Refundable

Sellers love to have non-refundable earnest money because regardless of what happens in the transaction, they have money in their pocket for taking their property off the market.  

RISK:  Once the Buyer agrees to make the money non-refundable it is no longer theirs. Should the contract be terminated for any reason they risk losing that money altogether.  The Buyer will want to seriously consider how much money they are willing to part with.  The Buyer may also want to consider waiting to make the earnest money non-refundable until after they have completed certain due diligence items such as the home inspection.

Delayed Occupancy

Depending on the Sellers' situation, they may need time after closing to secure housing.  For example, the Seller may be having a home built or they have to stay in the local area until a job transfer is finalized.  Regardless of the situation, allowing the Seller time after closing to move can be a very attractive term for the sale. Sellers will be even more grateful to Buyers that offer the delayed occupancy rent-free!

RISK:  Be sure to have a delayed occupancy agreement signed and agreed on prior to closing.  We highly recommend that the Seller retain insurance on the property while they are occupying, and the Buyer to have a clause addressing what happens if the Seller stays longer than the agreed-upon time frame. For some Buyers, this may not be an option because they need to secure housing quickly or their lease is ending.  

Check with your real estate agent to see if they have any short-term rental properties available to their clients. Short-term rentals are a great solution for all parties if you can find housing options to rent for just a few weeks or a few months at a time.

Escalation Clauses

Escalation clauses are terms stating that a Buyer will beat any competing offer by a certain amount up to a certain price point. These are amazing for sellers because if there are multiple offers an escalation clause can quickly and easily make the purchase price skyrocket. With an escalation, the Seller no longer has to do multiple counters to drive up the price and it is more apparent to them what the Buyers' maximum price point is.

RISK:  Buyers need to make sure not to overextend themselves.  They should check with their lender to find out the maximum price they are approved for so they do not affect their ability to secure a loan. Also, the Buyer loses some negotiation power because they are laying out their cards to the Seller in advance. 

We recommend the Buyer's agent always confirm with the Listing agent that the property is indeed in a multiple offer situation prior to using this tactic. Additionally, the Buyer should always ask for a bona fide copy of the competing offer for their records. 

Need Help?

Multiple offer negotiations can be tricky. Consult your lender, legal council, and real estate agent prior to using any of these strategies to make sure you understand fully the risks.  

Our agents have experience representing buyers in multiple offer situations.  Feel free to schedule a time to meet with one of our amazing agents to see how they can help you buy a home in this competitive market.

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