Back when I wrote about buying a house, I promised I’d tell you kids how I managed to navigate a multiple offer situation. And unlike that time your dad promised he was just going out for cigarettes only to never return, I actually plan to deliver.
Firstly, let’s talk a little about how you should buy a place. To be honest, I felt a little guilty being in a multiple offer scenario in the first place. That is pretty much the opposite of how I’d recommend you go about buying houses. I’ve bought five places in my lifetime–I still own three as rentals and sold the fourth when I went to South Korea–and this was the first time I had any sort of urgency. I like to wait patiently, taking the place off the guy’s hands right when he’s desperate enough to sell to dirtbags like me.
Hey, it’s worked before. Not all of us live in Toronto or Vancouver.
But like I touched on in the original post, we feel we got a really good deal on the house. Further investigation confirmed that. It turns out the property was listed by an out of town Realtor who priced it comparably to a place that sold last summer with the same square footage. That property sold for $203,000 which is why ours was listed at $199,000.
This Realtor didn’t know the whole story. The original property had some repairs done to it, but it wasn’t fixed up nearly as nice as our place. That place needed a new roof. Our place didn’t. That place had no garage while ours has a decent sized one I plan to fill up with counterfeit jeans. NOT IN MY CAR HOLD.
So we’re sticking with our original assessment that we bought a place worth $225,000 for $195,000.
Anyhoo, back to the offer. Here’s how we navigated a situation where we knew we were competing against at least one other buyer.
No screwing around
The first rule is pretty simple. Instead of screwing around with preliminary offers that are 5-10% lower than the list price, come in at very close to what you’re willing to pay.
We were originally slated to offer $180,000 for the place before we realized there were going to be multiple offers. That was quickly upped to $195,000, which was about as much as we were willing to pay. I probably could have been convinced to pay a couple thou more, but luckily we didn’t have to.
In that kind of situation, you have to show the seller you’re serious immediately. A strong first offer does that.
In my neck of the woods, people who make offers on houses tend to leave them open for 24-36 hours. That gives both parties the opportunity to think about things, and plenty of time for back and forth dickering. It’s about as relaxing as you can get negotiating for assets worth hundreds of thousands of dollars.
In a multiple offer scenario, you don’t want to do that. All it does is give the seller’s Realtor more time to encourage more offers. Multiple offers are a seller’s wet dream.
What we did was leave our offer open for a little less than four hours. That way we forced the seller to deal with us.
Legally a seller can only make a counteroffer to one person at a time. If you counter to both parties who made offers and they accept, you’ve got a dilly of a pickle on your hands. So as a buyer, I want to make sure the seller makes that first counteroffer back to me and not the other guy.
An offer with more time attached to it will naturally become the backup offer.
Be flexible on other stuff
Most of the time, sellers are motivated by price. This highly scientific equation explains why:
More money > less money
That’s Nobel Prize worthy equationing, kids. WHERE’S MY NOBEL PRIZE, JERKS? I’M ALWAYS GETTING SCREWED OUT OF NOBEL PRIZES.
But not every seller is motivated by price. Our seller came back with an offer of $197,000 as well as countering our August 15th possession date with July 31st. The Realtor let us know the seller wanted the place gone quickly and that was why the date was pushed forward.
I immediately pounced on this piece of information. We had the ability to close quickly so we offered the seller a more innovative counter. We’d let the seller pick the closing date in exchange for taking our $195,000 original offer.
The seller was agreeable and it was quickly made final. We’d have to close within 10 days, but that wasn’t a big deal. And in exchange we saved a couple thousand bucks.
This is where multiple offer situations get tricky. It’s pretty obvious an offer without conditions will be looked upon more fondly than one with conditions from the sellers’ perspective. That much is obvious.
As a buyer, this can be dangerous, especially if you’re looking at older places. There are often all sorts of surprises behind the walls of houses. First-time buyers are very susceptible to falling for a place that looks good on the surface but is death underneath the drywall. And unless you’re 100% sure in your ability to get financing tomorrow, not having a mortgage clause is a good way to potentially lose your deposit and possibly your sanity.
So this is tricky, because there are plenty of downsides to ignoring conditions. It’s not something you should do lightly. But it can also be the difference between getting a place and having to endure renting like a chump and/or chumpette.
Final notes? Don’t I sound classy.
Getting yourself in a multiple offer situation is probably not a good idea most of the time. Unless you find a place you think is massively undervalued, I’d recommend staying away from it. There’s a big difference between aggressively going after what can be confirmed as a good deal and buying something because you fall in lust with it.
Can a man be sexually attracted to his house?
But if you do decide to partake, feel free to consult this guide. Go ahead and do it several times a day until you’ve memorized it.