Many homesellers are intent on either the hope of selling fast, or at the highest price. Yet there’s a way to help you accomplish both of these goals. How is this possible? The secret is getting homebuyers to compete for your property. Curious? Find out more…in this helpful real estate podcast!
One simple way for homesellers to improve their results is by taking advantage of the current housing market. While homeselling is typically easiest in what’s known as a ‘seller’s market’ when housing supply is low, homesellers can make this technique work in most market conditions. This is akin to the art of judo, where you use your opponent’s weight against him or her. To do this requires having your Realtor perform some research and it’s well worth it.
The ‘Bidding War’
In real estate, its essential to price your home properly in the first place, bringing in the maximum number of qualified, motivated buyers early on. You don’t want ‘lookie Lou’s,’ ‘lowball offers’ or ‘tirekickers.’ Instead, by pricing competitively, you’ll make buyers compete with each other for your home. This can initiate a ‘bidding war,’ where your property receives a critical mass level of buyer attention. Along with ‘jumpstarting’ buyer activity, this puts you more in the ‘driver’s seat,’ allowing you to choose the best offer, instead of waiting ‘hat in hand’ for buyers to step forward. A critical component in pricing your property competitively is reviewing sold comparable homes similar to yours.
The process starts with a Realtor’s market analysis of similar, recently sold local homes. For our purposes, similar means not only alike in terms of living space, bedrooms, bathrooms and ideally even number of floors, but may also include factors like school district. For example, don’t expect seniors to fall in love with your tri-level, since many simply don’t want to deal with stairs. While recently sold homes remain the gold standard for the purpose of accurate pricing, most Realtors will also review the present competition, meaning homes now currently for sale. Home pricing is part art and part science, so make sure to consider your Realtor’s observations on these factors so important to your success.
Multiple Offers: A Pleasant ‘Problem’
Homesellers enjoy receiving multiple offers, since it means a higher than usual likelihood of their receiving the highest price. Plus, who doesn’t mind knowing their home is considered desirable to homebuyers? Yet receiving multiple offers can make for difficult decisionmaking if you aren’t fully clear on what constitutes a very good offer.
Let’s say you’re a homeseller represented by an expert Realtor and have priced your property competitively. As a result of doing everything right, you’ve now received not just one offer, but several. What happens next? How do you make the best decision on which offer to take?
Once you receive multiple offers, the next few steps may require some analysis. One reason is because buyers and sellers have different needs. As a result, each offer usually has some unique strong points and possibly a few weak ones, too. Here are four simple steps sure to help to optimize your decision making.
1. Troll for More Offers by Telling Buyers
Once you have one offer in hand—but before you make any decisions—it’s helpful to build urgency by having your agent notify other potential buyers who have expressed interest in your property. Your goal here is to prompt a ‘bidding war.’ This approach enhances competition and many times buyers will ‘lurk’ after touring a home as they mull over their options. Receiving a Realtor’s phone call that an offer on a house high on a buyer’s list can sometimes build additional desire. Remember, when buyers compete, sellers win. While some buyers will attempt to avoid a ‘bidding war,’ you may engender competition among highly motivated buyers who may have already toured your home and haven’t crossed it off their list.
2. Prioritize Your Needs
What one homeseller may most appreciate in an offer, another seller may not consider so important. Before you determine your offer response strategy, you must first determine your goal. Otherwise, one seller’s win might be another seller’s loss. That’s because for you, top dollar for your house might beat every other consideration. But to plenty of other sellers, surety of closing, or being able to choose their closing date and having extra time to move out are highly important, even if the net proceeds from the sale are a bit less.
Take possession date, for example. Some homesellers need a few extra days after closing on the home they’re selling in order to coordinate moving into their next home. To them, an offer that provides added time can mean a lot by saving stress, time and even money, depending on the circumstances. However, for homesellers with an already vacant home, delaying the time they need to be out of the house isn’t much of a benefit. Be clear in your own mind what constitutes the most important aspects of the ideal offer.
Is a high selling price the big priority? If so, a strong offer without requested seller paid closing costs or repairs is likely to work well for you. Or is a fast close with the surety of the transaction going through the single biggest factor? If so, a cash offer with no need for an appraiser or loan underwriting is likely to be especially attractive. In addition to these factors, also consider weighing the strength of each buyer. Normally, buyers with a larger down payment can help the loan process go smoother, as the bank is taking less risk.
3. Analyze Like Benjamin Franklin
Once you’ve garnered as many possible offers for review, this phase helps to single out the best offer for you. Just make sure you’re comparing apples with apples. A full price offer may not look so good if that buyer is asking for $10,000 in seller paid closing costs. One helpful tool to sort out the benefits and downsides of multiple offers is to take a lesson from Benjamin Franklin:
“…my Way is, to divide half a Sheet of Paper by a Line into two Columns, writing over the one Pro, and over the other Con.”
Consider placing the most significant elements from each offer on the list under either ‘Pro’ or ‘Con.’ Following Ben’s advice, write in the benefits of each offer in the ‘Pro’ column and also for the ‘Con’ column. Because a cash offer eliminates requirements from loan underwriters, most homesellers will place the element of a cash offer in the ‘Pro’ column since they don’t involve loan underwriting or the risks of an appraisal.
Does one buyer require a payoff on an iffy insurance policy at some distant date in order for that offer to work? Given added uncertainty, that’s a ‘Con.’ Is one offer subject to an acceptable offer first being received on that buyer’s property, which isn’t even on the market yet? Given added uncertainty, that’s a ‘Con,’ too. Does one buyer have barely a 10% down payment, with another buyer placing 20% down and yet another buyer coming in with a down payment of half or more? You guessed it. Compared to more favorable offers on the table, the lower down payment brings added uncertainty, so put such factors in the ‘Con’ column, too.
Thoughtfully proceed down the list, while making note of those factors most important to you. They may include a more or less desirable closing date, or a request of an offer requiring that you pay some or all of the buyer’s closing costs.
4. Implement the Franklin Strategy
Now that you know what’s important, this step aims to achieve the results you seek. Review and rank how each offer reconciles with your needs, to determine how each offer compares.
By now, you’ve already determined your goal, so here are a few common tactics to consider when responding to multiple offers:
- Accept the highest priced offer.
- Delay accepting any offer until you’re certain no others are likely to be made.
- Accept backup offers.
- Have your Realtor instruct each buyer’s Realtor to come in with their ‘highest & best.’
- Give each buyer a timeline to sweeten their offer with their highest price.
- Extend the offer deadline for current buyers to consider their offer and others to make an offer.
One important factor to understand is that many buyers will avoid a ‘bidding war.’ There are several reasons for this. One is because buyers often don’t like getting their hopes up, only to have them dashed. Another reason is because homebuyers have limits and hope to avoid offering a price over their heads.
About Those Heartwarming Buyer ‘Cover Letters’
It’s common for offers you receive to be accompanied with a letter from the buyers. This approach is used to personalize the buyers’ offer and help you to see them as more than a business transaction. While it’s understandable that competing buyers seek such an ‘edge’ in a competitive housing market, it’s helpful to understand what your primary goal is in the sale of your property. Is being charitable among one of your intentions in the sale of your home? What if buyers who pen an emotional letter are marginally qualified? What if they are actually disguising themselves as a private party, but unbeknownst to you intend on ‘flipping’ the home? There are even websites who coach buyers and offer sample letters to use in order to press ‘hot buttons’ in getting homesellers to consider their offer in a bidding war situation. As when considering any offer, first prioritizing what’s most important in the sale of your property will prove helpful in optimally determining your homeselling decisions.
Selling Your Oregon Home?
Contact Certified Realty using the contact form below, or call (800) 637-1950 for a free consultation to find out what your property is worth in today’s market.