Dealing with multiple offers on your home
As the market has truly rebounded over the last few months we've been seeing more and more cases of multiple over full price offers, which has been a welcome reprieve from early spring when buyers were more rare than pink unicorns. Just in the last few weeks alone, many of my sellers have been getting bids 10, 20 or even 40K above their asking price. Much of this success can be traced back to a few simple factors – proper preparation, proper pre-marketing, and hitting the ground running with an aggressive pricing strategy from the beginning.
I can't overstate the importance of using the prelisting period to really make the house stand out from the competitors. In the recent years when the market was much different think we all focused more on how quickly we could hit the market. Now, however, we're spending a lot more time, energy and in some cases money doing things to make the property as attractive as possible to potential buyers. In many cases, this includes painting rooms to freshen them up and bring in more neutral colors, replacing old carpets where needed, and hitting any obvious home inspection items such as rotted wood or leaky faucets way before the first buyer steps through the door. Doing this type of work requires a very critical eye – but more importantly an understanding of what things we can do that will give us a huge return on investment. No sense in spending $1,000 to get $1,000 more later. On the other hand, if one can spend $1,000 and get $10K back at the time of sale, it becomes a no-brainer. That's where the expertise of the agent comes into play – in understanding just what those returns are likely to be down the road. Along those same lines, of course, is being able to find the people to actually show up and do the work. Over the years that's been one of my critical missions – assembling a team of vendors that not only do quality work, at a reasonable price – but also show up and get things done. It's taken me quite a bit of time to find people I can trust and depend on, but it has really paid off.
Okay, so you've done all the work, and properly prepared the home for sale and it's time for the pre-marketing period to begin. We've worked together to come up with the best pricing strategy. Not too low, not too high – but just right. Preferably, we've tickled the lower end of the fair market value range to try and stimulate interest. When possible, if we can hit one of the natural break points in pricing – that's always a plus. For example, I recently listed a home in Shrewsbury that we easily could have put on the market at $659,900 – but instead we snuck it just below the $650K mark. As a result, we had over 50 couples at the open house, and multiple offers – selling it for substantially over the asking price – a result that I don't believe we would have achieved had we listed it higher.
When those multiple offers do come in, we need to be prepared to evaluate them on a case-by-case basis. One thing for sure, it's not all about which one is the highest price. We've had serious issues over the course of the last few months with Buyers being unable to get financing, especially with low down payments. In the lower price ranges, under the high $300s range, it hasn't been too bad because the FHA program has helped out with financing, but once buyers get up into the $400s or higher, it's been a huge issue. What has made it harder, in my opinion, is that the lenders are pretending there's no problem. They are still giving out "pre-qualification letters" like candy, saying that buyers are "pre-approved" for 5 percent down financing on a 500K purchase, and then in the comments on the bottom it reads "subject to private mortgage insurance approval." The PMI companies, however, are giving out virtually no 5 percent down PMI plans in Worcester County right now, and the lenders know this, so it's been a tad befuddling as to why the Buyers aren't just being told this up front.
In any case, when we do receive multiple offers, the first thing we're going to look at, even before price, is the financing package. We want to select right off the bat the Buyer with the strongest financing qualifications. Then and only then, we will refocus our efforts on pricing. Going back to all Buyers, and asking all to submit their "highest and best bid" is one useful technique. When one does that, however, you really only want to go back to the Buyers who you have already deemed to be qualifi ed. In other situations, we've had multiple qualified bidders, but one truly shined above the rest, in terms of down payment, credit or other factors. In those case, we may go back only to that Buyer, tell them that we've established them to be the most qualified, but let them know we have other higher bids. Giving them the opportunity to match the highest offer results in a true win-win situation for everyone. In the end, though, you almost always want to accept the bid from the most qualified party, even if it's a couple thousand below the top offer. Ultimately, a high offer from an unqualified Buyer yields absolutely nothing. At such times, the best thing to do is to listen to the advice of a qualified agent. They've been through this thousands of times and can really help you look beyond the surface and select the best possible offer to get you and your family happily moved.
Steve Levine in President of Steve Levine Inc., and an agent for REMAX First Choice. He's been recognized as the Top REMAX Agent in New England since 1998, and can be reached online at firstname.lastname@example.org or by phone at 508-735-4663.
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