Multiple Offer Strategies

• Ask your buyer’s agent to contact the listing agent to determine how the sellers want to handle multiple offers. During this conversation, your agent can inquire about the sellers’ motivation and significant concerns in selling.  Knowing these answers gives you an advantage when you prepare your offer.
• Use a reputable local lender to get preapproved for your mortgage. If your preapproval is from an out-of-town or internet lender, it can create doubt in the sellers’ minds. You might also ask your loan officer to call the listing agent on your behalf to assure the sellers that you qualify and can close in time.

• Write an above-average amount of earnest money into the offer. The typical earnest money check is about 1% of the offer price.  Your bid will stand out by submitting a higher than average earnest money amount.
• In North Carolina, due diligence clauses were added to our standard contract forms in 2011. Some buyers have been writing sizeable due diligence checks to sellers in the hope of having their offer accepted. If you decide to follow this strategy, understand that there are risks involved.

For example, suppose you are under contract, and the home inspection report comes back showing that the heating and air system and roof need replacing.  In a hot sellers’ market, the sellers could refuse to install new units and roof. The buyers will then need to decide to go ahead and buy the home or walk away.  However, the buyers would not be entitled to their due diligence fee back.

So instead of writing a substantial due diligence check, write a significant earnest money check.  Check out the Key Point section below for the difference between earnest money and the due diligence fee.

Check out this article from the National Association of Realtors on Multiple Offers.

Buyers and Sellers Guide for Negotiating in Multiple Offers from NAR

Median Days on Market

Available Inventory

• If your finances allow, specify a down payment amount of 20% to 25%. A sizeable down payment is a solid signal to the sellers that you are financially able to buy their property.
• Do not make the offer contingent on the sale of your home. Instead, work with your lender to get preapproved for financing, which does not require you to sell your present house before purchasing another property.  During this time, you can still work with your agent to sell your current home.
• A way to stand out from other bids is to offer to pay some of the sellers’ closing costs. You can agree to pay a percentage of the commission the sellers have agreed to pay in the listing agreement.

• Do not ask the seller to pay any extra fees including a home warranty, instead, add the cost to your closing costs.
• As much as possible, shorten each contingency deadline (financing, inspections, etc.) to the fewest number of days possible. However, before you shorten this deadline, make sure you contact the inspectors you want to use to see if they can schedule their inspections within the due diligence period.
• Add a clause that allows the sellers to rent back from you after closing if they need time to find a new property.

Difference between Earnest Money and the Due Diligence Fee

The Earnest Money is money that shows good faith that the buyers want to buy the home.  The amount of Earnest Money is a negotiated item in the contract.  Typically the amount can be 1% of the purchase price. The check is written to the closing attorney to hold in their trust account until closing.  This amount shows as a credit to the buyers in the closing disclosure.

The Due Diligence Fee is money offered to the seller for taking their home off the market.  During the Due Diligence time frame, the buyers inspect the property and get their financing.  If the home closes, the due diligence fee shows as a credit to the buyer on the closing disclosure. However, if the buyers decide not to buy the house for any reason, they are not entitled to get their Due Diligence Fee back.  The check for the Due Diligence Fee goes to the Sellers.

Check out the latest Market Report

The high buyer demand and low inventory have caused tight competition among buyers for available properties. If you are thinking of buying a house in 2021, be prepared to compete against other qualified buyers for the same property.  Multiple Offers are becoming the norm in most markets.

When a listing comes on the market, buyers rush to see it.  It is not unusual for there to be multiple offers on a new listings within a few days of it being entered into the MLS. Knowing the sellers motivation can improve the buyers chances of getting their offer accepted.

Tips for Buyers:

1. Get preapproved and know your housing budget.
2. Understand that it will take more time to find a home.
3. Review the statistics for the local real estate market.
4. Be prepared to act quickly.