Some of the most dread words for a home or condo shopper to hear are: “multiple offers”. The first thing my buyers think is… “I am not going to compete in a bidding war because I don’t want to over pay”. That logic is pretty standard as I don’t know anyone one who willingly wants to over pay for anything.
Obviously people still engage in this seemingly cavalier behavior and end up winning the bidding wars despite this. Do they have regrets? I’m sure some do. I’ve heard from people who felt the agent involved gave them the wrong advice and made them offer way too much money and in retrospect they could have offered less to win.
On the other hand perhaps some people may have the opposite feeling, one of happiness because they were the victor. In this scenario the asking price may have been priced low and therefore the well informed buyer makes a conscious decision to give an offer higher than asking price but in reality they are still paying market value.
A third scenario can also be true. Sometimes there are extraneous circumstances which prevail and the buyer has no choice. I had a client some time ago who needed to buy an apartment next door to their own so their family can be close by for medical /safety concerns. So they waited and waited until the neighbor finally decided to sell. These buyers would have to decide on how important it was to own the unit next door vs. if they would have to compete in a bidding war.
The condo or home shopper really has to consider several things when shopping these days. Does there budget meet the asking price of what they want or is it more realistic to find something cheaper. How do they know their budget? Did they get a real pre-approved mortgage or did someone ask them 3 or 4 basic questions and gave them a rough idea? Confidence plays a huge role in a buyer’s strategy in multiple offer scenarios.
Many of my clients lately have been shopping at the top end of their budget. They find homes they like but guess what other parties like the same homes too. The thing is these clients are stretching to make an offer and are relying on negotiating the price down to be able to buy. With all these multiple offers out there they will almost surely not be able to compete should the bidding war happen. Now they have to look at a condo or home maybe in a different area to get the price to match or sacrifice something else.
Should the buyer wait until something else comes onto the market? Maybe it does maybe it doesn’t. I recall one time a client of mine found THE perfect condo. They waited to see if the owner would reduce the price and before they made an offer someone else did. They didn’t want to engage in a bidding war and lost their chance. It’s been 3 years and they still haven’t found anything like the one they lost. And the kicker is prices have gone up so much since then it would have been better to have at least tried to win a bidding war.
The usual manner for which a multiple offer is conducted is as follows. The seller agent will inform the agents representing the buyers there is indeed multiple offers for the property. The buyer agents are usually invited to meet at the seller agent’s office to make finally offers to the seller(s). This is done for transparency. The buyer agents can feel confident they are not being played because they are able to see all the agents present to make offers. But, no one knows what the other’s offer is so the buyer is asked to bring their best offer forward.
After the seller is presented the offers they will discuss with their representation the merits of each offer and reach a conclusion as to which is the best offer. The best offer is not always the one with the most money offered. Other variables are at play such as the deposit amount which too low could mean the buyer is not as serious, the closing date may or may not be good for the seller and the clauses for finance and inspection may be waived making the deal more “firm”.
If you are an informed buyer and can understand you budget, need and your timetable requirements are tight then go for it. You probably won’t have regrets afterwards. For those who know you don’t have the budget then don’t bother wasting people’s time and energy and move on to something more realistic. For those buyers who can “wait” years just understand prices are only going up and if you factor in the price increase over years you might be wiser to buy now. In the end you win some and you can lose some. But if you want to be the last man or woman standing you have to at least try.
By Todd Lee. Be social and share Google+