It is critical to align yourself with experienced loan officers and real estate professionals to help prepare you to be in the best position possible to win a multiple offer scenario.
by Peter Crowley, President of RE/MAX Alliance Group
By now, you would have to be living under a rock not to have heard about the intensely competitive real estate market throughout our local market. This seller’s market is not limited to Southwest Florida, but rather the entire country is experiencing the challenge of a limited supply of homes against swelling buyer demand. If you are an active buyer in today’s real estate market, you have likely experienced the frustration of losing out in a multiple offer situation on your potential dream home. All hope is not lost, however, if you equip yourself with some knowledge, persistence and patience.
It should come as no surprise that “cash is king” in a competitive multiple offer situation. Because of the larger percentage of second home and vacation home purchases in our local market, cash has always been a more prominent factor compared to the national average. This has been exacerbated by new entrants into the market – institutional investors backed often by Wall Street investment funds. Often referred to as “iBuyers,” these institutional investors are looking to capitalize on both the increase in home prices as well as the strong rental market for residential homes. To give one example of the increased competition brought on by these institutional investors, an entire newly built community in the Tampa Bay area consisting of about 50 homes was purchased in bulk by an institutional investor who plans on renting the homes, thus eliminating the consumer/purchaser all together.
If financing is a requirement for your home purchase, you must be more prepared than ever when entering this competitive real estate market. Now, more than ever, it is critical to align yourself with experienced loan officers and real estate professionals to help prepare you to be in the best position possible to win a multiple offer scenario. Whenever possible, it is helpful to get a full financing pre-approval on the specific property to demonstrate your ability to follow through on the purchase. An increasingly effective tool to compete with cash offers is the addition of an Appraisal Gap Addendum which states that the buyer has the financial means to cover the difference between the appraisal on the property and the actual purchase price.
Whether you are financing or paying in cash, there are a few more important factors to consider to position your offer most favorably. Escalation clauses – where buyers agree to incrementally increase their offer to beat out competing bids – are almost commonplace in this competitive environment. In addition, providing flexibility to the seller in the occupancy of the home (sometimes in the form of a post occupancy agreement) gives the seller additional time and peace of mind to know they have time to find their replacement home. Furthermore, while it is never advisable to forgo a home inspection all together, most buyers are offering to purchase the home as is and take on any responsibility for repair costs. Finally, offering to pay the seller’s closing costs can be another incentive to allow your offer to stand out above the rest.
Through the help of an experienced Realtor®, buyers can navigate through this competitive real estate market to position themselves in the best way possible to successfully purchase their new home. Setting the right expectations and preparing yourself to put your best foot forward in a multiple officer scenario will lead to an accepted offer on your new home. Always remember, “if at first you don’t succeed, try, try and try again.” Your dream home awaits.
We would like to thank our guest author Peter Crowley
Larry and Ann Brzostek
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