How I Approach A Multiple Offer Situation As A Buyer

There's something incredibly exhilarating about being in the real estate game, especially when you're handling your own transactions. For much of your role as a real estate agent, you're in the passenger seat, guiding clients through their decisions. But when it comes to your own property deals, it's like taking the wheel yourself, and that brings a whole new level of decision-making freedom and excitement.

The Thrill of a Good Deal

I've purchased multiple homes, but recently I faced one of my first truly competitive multiple offer situations. On the flip side, nothing beats the thrill of negotiating a fantastic deal. It's arguably even more exciting than handling multiple offers due to the inherent uncertainty involved. In my recent experience, the joy was doubled, as my partner and I managed to get our offer accepted out of a pool of eleven. This outcome got me thinking about my approach to multiple offer situations, and how my advice translates when making my own decisions.

Ignore the List Price

Here are some insights that contributed to our success, insights I regularly share with clients. First and foremost, in a competitive multiple offer scenario, the list price is irrelevant. Especially at higher price points, it's not an indicator of the price the seller will accept, nor is it based on solid facts. The seller's method for setting it is often unknown. Therefore, using it merely as a starting point doesn't hold substantial value. So, dismiss it from your calculations.

Calculate Your Opportunity Cost

Next is the consideration of opportunity cost. Deciding whether to go all in or to cap your offer involves understanding what else is available. If the property type is common at its price point, you might have more flexibility. However, unique homes, with features like security or specific sizing, increase buyer competition and escalation.

Assess Contingencies Comfortably

No contingencies can be a tricky area. Not everyone is comfortable with this, and not every market demands it. It's vital to understand what contingencies offer in terms of protection, and what alternatives and worst-case scenarios you might face. Thorough comprehension helps in making informed decisions, rather than rushing through them. This is a topic to discuss with your agent early on.

Make Your Escalation Factor Count

A significant escalation factor is crucial. An escalation clause is an agreement to increase your offer above a competitor's bid by a certain amount. Often, these are low, say $1,000, but sellers seldom choose offers with low escalation over others with better terms overall. Therefore, your escalation should be at least 1% of the sales price to carry weight. Consider if your competition includes a cash buyer ready to close quickly. The potential to outbid such offers is the standard you should measure your escalation against.

Reflection and Assistance

These reflections contributed to our recent property success. Navigating multiple offers can be complex but understanding these elements makes a difference. If you have any questions or wish to discuss strategies for managing multiple offers, feel free to reach out at any time. I'm always here to help illuminate the path ahead in your real estate journey.