Fear of Losing. The Illusion of Multiple Offers.
Once unheard of, ten or twelve offers received on one house are expected today. Three or four offers are a disappointment, if not embarrassing. Imagine going to the office on Monday explaining why only four people made offers on your house!
There was a time when people didn’t want to get into a bidding war. One Offer was too much competition. Those were the days when buyers had options. The options now belong to sellers.
Multiple Offers aren’t what you think they might be. Is there a correlation between the number of offers and dollars above the asking price? If ten percent over the asking price (the max you would pay) was $40,000, and you heard the owner had two offers in hand, what price would you make your Offer if you were the only buyer? What would you offer if you knew the owner already had 12 offers? There is no right or wrong answer. But there are reasons to be hopeful and try your best regardless. Most offers on the table are not acceptable as written. When your offer is acceptable as written, the ones that aren’t are not your competition.
Three reasons you should not fear multiple offers.
1) Standardized offers. Wisconsin real estate licensees get trained to fill in the blanks and check the boxes of standardized forms. While some brokers think outside the blanks and know how to craft a more seller-safe offer, most agents aren’t there. That’s too bad for the consumer because the most risk-tolerant, capable, and committed buyer’s Offer in the hands of most agents will look just as risk-averse and uncommitted as the least attractive Offer. Most purchase agreements will not satisfy the seller’s desire to be worry-free, not because the buyer wanted protection, but because the person drafting the Offer didn’t know how to make an offer more acceptable
2) Fear of losing. The same psychological reaction that causes people to make their best offers knowing other people are trying to buy the same house, can stop another person from offering a price and terms that friends and family will consider foolish. A home inspection, attorney approval, or sale of home contingency is protection for the buyer and risky for the seller. Some people need protection. Some don’t. A $400,000 home will draw more offers below $425,000 than above. Even high-priced Offers might include contingencies that cause the owner to hesitate. We often see lower-priced safe and sound bids accepted over higher-priced Offers. If the owner hesitates, you want to be there with the safer alternative. There are exceptions, but the offers to beat are likely to be no more than 5% above the asking price.
3) Unacceptable As Written. More times than not, before a seller can accept an Offer, something needs to be changed. One Offer is accepted over another because one is acceptable as written, and others require a counteroffer to fix some flaws and minor weaknesses. Given a choice to wait and see if a buyer will tweak their Offer or wrap it up and accept another, owners aren’t likely to linger.
So, when you can’t or won’t outbid everyone, do these three things and get your Offer in. (1) Make sure your Offer doesn’t look like the rest. (2) Overcome the fear of losing. (3) Find and fix errors. Mistakes happen. But they don’t have to go uncorrected.
When you hear there are a dozen or more offers in the hands of the listing agent, instead of giving up, remember this: You don’t have to beat everyone; you have to beat the best Offer. BE the Offer to beat when it’s THE house you want. Price does matter, but safe and sound might make up for a few dollars more.