Multiples, Holdbacks, Sign-backs, Low-balls, and Jumping the Queue
We have helped you find a home that you feel comfortable with and you can really see yourself living in the home. It is time to make an offer. Deciding of how much to offer is one of the most difficult decisions you have to make. You don't want to offer too much or offer too little, you may loose the house especially in a seller's market. My team will help you determine what market value is by showing you what comparable houses nearby are selling for, expertly assessing the condition of the house, and judging the type of competition you may face. I will give you a range of what price to go in at, which gives you the best chance of winning the bid without outbidding other people by too much! Once we've decided on the price you're prepared to offer, and any conditions that may need to go in the offer, my team will draft this legal document and go over all the details with you.
When I present the offer to the Seller's agent on your behalf, I'll use all my skills and experience as a negotiator to make sure you get the best possible deal!
In this seller's market, multiple offers (where a single property has more than one registered offer) occur especially if the property is in a desirable location, well priced, renovated and property marketed. In situation like this a 'holdback' date is often used by the Sellers to create a sense of urgency while giving their property time to be seen by more interested buyers. We will discuss this situation with you, and assist you in deciding whether this is the home that you would really like. If you answer is YES, then it's essential that you are ready to submit your offer, and go with the highest price you can afford to prevent regrets. Many times buyers have lost the home of their dreams by only a couple thousand dollars (pennies a week in the context of their mortgage).
There are other ways to win out in a multiple offer situation? Most Sellers would rather accept a firm deal over one that has conditions. Your financing has to be place with pre-approval from the lender, before submitting your offer. Other considerations would be a large deposit on closing and a completion date that the Seller needs.
If the Seller gets several offers all within a close range, the Seller's representative may instruct the various buyers to go back and improve their offers, so you might have a second or even a third chance to offer more $ but this may not happen, so it's important to go in with your best offer first!
A 'bully' offer: is an offer to purchase submitted before the holdback date. ‘Jumping the queue' can be an effective strategy if your offer is strong enough that you feel the Sellers will accept it even before their holdback date.
If there are no other offers except yours, the worst thing you can do is to offer the seller a lowball offer. In the case of a low-enough offer, the seller will often be insulted by your offer and could prefer to give the house to almost anyone else, even if you deliver a slightly higher offer later.
The Seller can either choose to accept it, reject it, or sign it back (counter offer). If they sign it back, for a higher price, or make other changes, there will be an irrevocable date on the offer. This is the date by which you must counter-offer or the deal will be null and void. We will look at the sign-back, keeping your goals uppermost in mind while I negotiate with the Seller's agent to reach a win-win outcome for all parties.
Offers can be firm or conditional. A firm offer is usually considered to be stronger than a conditional offer. It means you are prepared to buy the home as-is with no conditions. A conditional offer means you have placed one or more conditions on the purchase, meaning that the home is not actually sold until all the conditions are satisfied or waived.
There are five main elements to keep in mind drafting an offer:
- Price - this does not have to be the same as the seller's asking price but it usually helps, unless there's more than one offer, in which case you should be bidding higher than the asking price!
- Deposit - shows your good faith and will be applied against the purchase of the home when the sale closes. Should be at least 5% of the home's purchase price.
- Conditions. Standard conditions can include subject to home inspection, subject to you obtaining financing, or subject to you selling your existing property. A condition can be anything however. Sellers obviously don't like to have their homes effectively ‘off the market' while they wait for conditions to firm up, so the shorter the conditional period (i.e. 3-5 business days) the better chance the Seller will accept your conditional offer.
- Inclusions/Exclusions - Your offer may be contingent on including certain items in the sale, such as appliances, fixtures, and decorative items.
- Closing date - The Seller will often specify the date or date range they'd like to close on the property and your offer should closely match this. The closing date is the day the title of the property is legally transferred to you and the funds go to the Seller.