How to get a ‘deal’ in a hot market

When the market is on fire and there are multiple offers on nearly every property, getting a ‘deal’ may mean getting your offer accepted at all. There are no gifts in this market. When there are “deals” to be had, investors either buy them themselves or agents send them to their investor clients before the public ever gets to see them. However, the bright side of these rapidly appreciating values is that, from the time you get your offer accepted to when you close escrow, you may have already gained some equity. So the key question then, is how do you compete with 20 other offers and not just pay more than everyone else? Is that even possible?

As a buyer, you can only truly work within the parameters of your financial situation. So what can you do then to have your offer stand out in the swarm of offers obtained by a popular home? Overall, you want to present your best price and cleanest possible offer up front, in order to give your offer a fighting chance. By offering a competitive price, limiting or removing contingencies, fully accommodating the seller’s timeline and adding a personal touch, your chances of getting your offer accepted increase greatly. Many times it’s not the highest offer, but the competitive offer that the seller feels most confident will close, that wins out at the end of the day.

When buyers are clamoring over homes with several offers, there is typically a handful that have no chance. Whether it’s way off on price (agent’s fault), or have all contingencies left maxed out (agent’s fault), or timeline doesn’t work for the sellers (agent’s fault), this is not the category you want to be in. What these types of offers tell me is the agent isn’t educated themselves or can’t properly educate the client enough to put a decent offer together. 

The easiest way to avoid being in this group is to have an agent that understands the market, is going to put the time into learning about what’s most important to the sellers and provides explanation and statistical support when they suggest a price that is 50k or 100k+ above what you think the home is worth. From a seller’s perspective, these types of offers aren’t even in conversation and it’s a bad place to be as a buyer.

There are also middle of the road offers where they have lowered or even removed contingencies, taken the sellers needs/timeline into consideration and are closer on price but still aren’t competitive with the top offers. These typically are well put together but don’t really stand out. Either the agent was off on his evaluation of price, the buyers didn’t fully feel comfortable with the home and therefore made a lower offer or they couldn’t financially get to a competitive offer price. 

It could also be that, although they are competitive on price, they kept contingencies in place, giving themselves the ability to back out. It can be worrisome for a seller to accept an offer from a buyer that has the ability to back out 2 weeks later. This is the case because the seller may have to repeat the process of finding a buyer. In Silicon Valley, sellers typically do inspections upfront to limit the need for buyers to have contingencies. So unless there’s a specific reason to keep a contingency in place, your offer instantly becomes stronger if you are able to remove contingencies. If at all possible, remove contingencies. It gives the seller peace of mind knowing the sale is going to be completed.

Then there are the top 2-3 offers that are really the ones that are competing and those are the ones that get countered or have a chance of being accepted. These offers are competitive in price, have contingencies removed if possible and have the sellers needs taken into consideration.  If the seller has asked for a rent back or need more time to make their next move, and you have the ability to accommodate that, by all means do! That alone can be more attractive to a seller than the offer that’s 10k higher. 

Also, always add a personal touch. Even if you are buying a flipped home from an investor who only cares about selling price, include a personal letter with a picture of your family. You never know who your seller is, and it’s possible that the details of your letter may convince them to sell to you from an emotional perspective. Maybe the seller has kids themselves and wants another family to live there. Maybe they love dogs. Include who you are and why you would love to live there in every offer, so it’s not just about the numbers. When you put a human experience behind it and it’s easier to attract even the investor sellers to your offer. It never hurts your chances and is always worth the time to put together. If there’s anything your agent can learn about the seller and what’s important to them, include that in the letter as well. Assume your whole offer is riding on that letter because sometimes it is.

Also: don’t leave room for negotiation. Always put your best offer on the table from the start. With multiple offers, there isn’t always a round of counteroffers. By offering lower than you’re willing to pay, you may bump your offer out of the contention or put your offer in a group to be countered when your original best offer would have sealed the deal. By opening up rounds of counteroffers, you run the risk of a full-blown bidding war and end up paying more at the end of the day. I advise clients to get to a place where if their offer is accepted they won’t feel like they’ve overpaid or have buyer’s remorse and if they don’t get accepted because someone paid more, they are fine with it. 

We are in one of (if not) the most competitive markets in the country, so you want to do everything you can to make your offer the easiest decision for the seller. If you can’t win on price, make sure every other part of your offer is just what the seller is looking for you you may be able to land a ‘deal’.