How buyers can compete in multiple offers

Key Insights

• Home inventory continues to be low, making it a tricky market for home shoppers who have a specific location in mind.
• By preparing financially and making the right adjustments, buyers can compete and win in multiple offers.
• While it does help to have the highest offer, there are other ways to stand out from competing buyers to win your dream home.

If you’ve studied Economics 101, then you know that as the supply of a good falls, the demand for that good rises. And while we’re seeing a rise in housing inventory, it still far outpaces buyer demand, making it a sellers' market. As a result, prices have been rising and those shopping for homes may find themselves competing against other eager buyers.

Common wisdom says that the highest offer will win every time, but the reality of multiple offers is a bit more complex. Here are insights you can use if you enter multiple offers when buying a home this year.

Assess the market

Our market research shows that some regions have tighter inventory than others, but no matter where you are buying, it’s important to talk with your REALTOR^® about the market and inventory so you know what to expect. They will be able to pull information on what comparable homes are selling for in that area and if there are any other terms that are sought after. Real estate is all about location and local quality of life, so hiring a specialist who serves your desired area will be critical to making the right bid.

Go big to get home

While the highest bid isn’t the only consideration sellers make, you’re unlikely to get the sale if your offer is at the bottom of the heap. When making an initial offer on a home in high demand, your REALTOR can help you submit an offer that is slightly above the average home value for the neighborhood.

Together, you can strategize on the benefits of offering your best offer out of the gate — meaning you would walk away if the home still gets multiple offers — or offering below your “ceiling” so you have the ability to increase your offer against competing bids.

VIDEO: Multiple offer tips for buyers

Keep the offer as clean as you can

There are a variety of contingencies and additional terms you could include in an offer. But a seller looking at multiple offers will naturally look more favorably on offers that are not complicated and don’t ask for much. If the offer prices are the same, do you think a seller would prefer an all-cash offer with no contingencies or one where the buyer is asking for intrusive moisture testing (even though the house has no history of moisture) and wants the seller to throw in their big screen TV to sweeten the deal? The cleaner the offer, the better the chance of beating out others.

With that said, you may need some contingencies and terms. For example, you may need to sell your home to be able to buy a new one. If so, you’ll need contingency language for that.

Inspections are another point of contention. Having a purchase agreement contingent on an inspection is extremely common in our marketplace. But in order to compete with other buyers, some may write offers not contingent on an inspection.

Edina Realty recommends getting an inspection on every home purchase because inspectors can see issues that you and agents cannot. And they often identify issues that the seller wasn’t even aware of. Sometimes it may make sense to write an offer not contingent on inspection to get that dream house. Just understand that you are not getting that expert view on the condition of the home and, if there are issues, they likely will be your issues to address once you’re the owner.

Put cash down and get pre-approved

Another way to impress sellers is to show that you have a substantial down payment and that a lender has pre-approved you for a loan. Both of these steps display that you are a lower-risk buyer, and the seller and their agent may feel more comfortable with you than someone who hasn’t done their lending homework.

Offer better timing

One last way to stand out in multiple offers is to offer the seller a beneficial path to closing. If the homeowner is hoping to sell the home immediately, it would benefit you to offer a closing that could take place within a month or even a few weeks. If the seller is waiting on a new construction home that won’t be ready for 60 – 90 days, offer a delayed closing. When multiple bids are close, these tactics can make all the difference.

Starting out

Ready to enter the market? Begin your home-buying process by reaching out to Edina Realty or your agent today.