Buyers: Plan Your Strategy in Multiple Offer Situations!

by arlene on June 2, 2012

Since mid-March of this year multiple offers have become a common occurrence in this part of the East Bay’s real estate market. In most of Berkeley, Albany, Rockridge and other desirable neighborhoods, offers from two to 24 have been received on properties. Some of these offers have been astonishing–not just in the amount offered, but in the strength of the terms. So here are some tips for buyers to keep in mind when faced with competition, starting with context: Multiple offers are an economic reaction to low supply and high demand. Rather than being discouraged by competition, gather key information and plan your strategy.

Begin with a careful analysis of value, not price. All list prices are not created equal! Some agents are known for pricing below market value to encourage multiple offers. With low inventory, there may be few comparable properties. What is the property worth to you? Does it have value to you not easily reflected in the price per square foot number?

Measure momentum. How is the market moving for this area and type of home? Have the closest comparable sales closed escrow? Your agent should know if similar homes have received multiple offers. If so, did they stay close to the list price, or far exceed it?

Do you really love the property? Have you rarely seen a home that inspires you like this one? How would you feel if you lost the home over a relatively small percentage of the price?

Size up the competition. What is the number and quality of the offers? Your agent may be able to learn who the other agents are, and their relative strengths. Does your agent know this listing agent well? Is your loan broker well-trusted in your area?

Your offer contains more than just money. It’s also about limiting time exposure and risk to the sellers, in your close of escrow date, and contingencies for loan, appraisal and inspections. Make your time periods the shortest practical. We’re seeing LOTS of all-cash offers lately. All-cash offers mean shorter escrows and for many, no appraisal contingency.  If you can’t compete with lots of cash, try to limit the contingencies. Consider doing pre-inspections if the property really fulfills your needs.

You can often add value with an emotional connection to the sellers. Consider writing a love letter to them, and make sure your agent will present your offer in person. I always read my buyers’ letters to the sellers, to be sure they really envisage my buyers as the next owners of their home.

This is a longer version of a post that appeared in the San Francisco Chronicle on Sunday. I’m honored to have been asked again to submit information about the current pulse of our real estate market.  

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