The last time the Austin real estate market saw this many multiple offers was in 2006 and 2007. Back then, buyers working with me and Sylvia won more than their share of these competitive offers by following a simple strategy, which was, make your offer acceptable and ready to sign with no mistakes or weird language. That’s it, basically. There is also the cover letter, and offer price strategy, but it’s not rocket science. More on that in a minute.
I was fired by a buyer in 2006, who told Sylvia “I only want to work with you from now on. Steve is pushy, arrogant, rude and doesn’t listen to me“. Actually, I did listen to the most important thing this buyer was telling me. She really, really wanted this house and would be very upset if she lost it to another buyer. Understood. I know the mission and what we must do, I told her. We need to write a winning offer, and I know how to do that.
So we sat in Starbucks and started writing the offer, at which point this California buyer wanted to instruct me about how and what to write, which included some non-standard language and quirky California nonsense. I was confused, because on the one hand, buyer really wanted to be selected over the other multiple offers, but on the other hand buyer was insisting we write the offer in a way that would doom it to failure.
Therefore, I repeatedly said, “no, we’re not going to write that in. You want your offer to be the one the seller likes most and decides to sign without countering“. It was like pulling teeth, partly because we were both “Type A personalities, but what we ended up presenting the seller was a super clean, ready-to-sign offer, with no mistakes or goofy non-standard provisions. Seller indeed liked our offer best and signed off as-is, without countering everyone for “best and final”. The buyer got the outcome she really wanted and was happy about that. But then she fired me because she was so upset with my refusal to write the offer her way. I felt less bad about that than I would have felt about sending in a crappy, embarrassing offer that failed the buyer. Sylvia took over and everything went smooth through to closing.
Fast forward to yesterday.
Sylvia received a call yesterday from the buyer agent for a buyer who, at first, had submitted the highest offer in a multiple offer situation for one of our listings. Though it was the highest offer, it contained goofy, non-standard provisions which the buyer stubbornly refused to change. This after our seller decided to pick his offer and work it first, rather than countering everyone for “best and highest”.
First, Earnest money was too low, less than 1/2 the normal amount. That confused us. We told the agent “that needs to be 1% at least“. Then there was the long Option Period with low Option Fee, a demand that seller provide a new survey, an extended closing date, and more.
We tried to clean up the offer with a response, saying “fix these things and send it back and the seller will favorably consider signing if we don’t receive something better before then“. Buyer stubbornly refused, so we turned our efforts to another offer and got that one to work under the same terms this buyer could have obtained.
The winning buyer has survived the Option Period and is on the way to close later this month.
The losing Buyer agent called yesterday to tell us the losing buyer is extremely remorseful because buyer can’t find a house as desirable as the one he missed. Buyer wants to know if there is any way to get another shot at the house.
Yes, write a backup offer.
But, to the agent, or any agent who knowingly allows a buyer to dictate losing terms in a multiple offer situation, I would ask, why did you let your buyer dictate the losing terms of the offer instead of cleaning it up and presenting something clean? I mean, you knew it was multiple offers, and you sent that garbage offer anyway, which had zero chance of being signed as-is. You should have forced your buyer to write a proper offer. You should have stopped your buyer from shooting himself in the foot.
I could divert here into a sidebar conversation about the fiduciary role of a real estate agent, and what that means, but I’ll instead state simply that some agents believe their role is to simply follow the instructions of a client, no matter how misguided, and others believe that the agent has a duty to advise and counsel a client, even if that means arguing and disagreeing with a client about which move to make, or how to respond to a certain situation. I’m in the latter camp. It’s the difference between a Fiduciary Agent vs. Functionary Agent.
If you are an Austin buyer, or thinking of becoming an Austin buyer, and you’ll be searching for a home in one of the many areas in Austin that have become a Seller’s Market, such as the 78749 zip code, Circle C, South Austin, an important question to ask your buyer agent is:
Do you know how to write a competing multiple offer that wins?
Then, in response, that agent should be able to articulate a strategy and “best practice”, that, though not guaranteeing success, allows you to know that the offer you present is an offer that was not set aside over an avoidable technical issue or mistake.
So What are the Best Practices for Multiple Offers that Sylvia and I employ?
1) Identify the correct “Regret Point” for your offer amount.
The price at which, even if you lose, you are at peace that you didn’t offer more, and you’ll simply move on with no regrets, focusing on the next house instead of dwelling on the one that got away. You find that tricky “perfect offer amount” spot by not thinking about how much you want the house, but how much you might regret not getting it. Think “regret avoidance”, not “happiness gain”. I always ask buyers, “if we offer this amount and lose to a higher offer, are you ok with that or will you deeply regret not offering more, beat yourself up and tell me you should have offered more?” It’s a very subjective, emotion based exercise, but it’s the most important thing to determine before writing the offer.
2) Write a clean offer, leaving nothing but the price to be countered.
This is not difficult, but most agents don’t do it. If it’s multiple offers, use the Title Company the listing agent prefers, not the one your agent likes. Offer a higher Option Fee and shorter Option Period. Earnest Money should be 1% of offer price or higher. Show that you’re serious. Don’t ask for a new survey, money back at closing, excess Home Warranty amount, and don’t write demands such as “seller to clean windows before closing”. Don’t insult the seller. This isn’t rocket science, but so many buyers and agents really foul up offers with dumb and unnecessary offer provisions.
3) Communicate clearly any narrative that enhances the desirability of the offer.
This item could be the topic of an entire article, but, in short, sellers will in fact often choose the people they like, or relate to, over a higher offer from an unknown buyer. For example, if you are a family with three young kids making an offer for a home being sold by a family on a cul-de-sac full of families, and you’re competing against an investor, then that seller needs to know who you are because they want their neighbors to have another family, not an investor and renters. If you don’t convey who you are and give yourself that advantage, you and your agent are blowing it. Your agent should know this. You can either write a cover letter directly to the seller or your agent can write a letter or speak with the agent when sending the offer.
4) Communicate clearly ALL areas of flexibility that you’re able to offer
If you can be flexible on closing date or by offering a Seller Lease-back, make sure the seller know this. If you are an investor buyer and not moving into the home, and we know the seller will be closing on a new-built home in 5 months, we can make your offer include an offer to lease-back to the seller for 5 months. The owner-occupant buyer can’t be that flexible, and if the seller is looking at an offer that allows them to remain in the home after closing and only move once, they are going to give a lot of value to that offer even if it’s not the highest offer price.
5) Use a Competent Agent
I almost didn’t add this last point, because it should go unsaid. But we do in fact have a buyer under contract who won a multiple offer situation in the 78749 zipcode last month primarily because the listing agent knows and likes Sylvia. The agent told Sylvia, when letting her know our offer was selected, that he told the seller, “I know Sylvia. She’s a good agent who runs clean deals. And this is a clean offer. I don’t know these other agents or how they do things“. The reputation and experience of your agent can matter.
The Austin real estate market is looking up. I’m withholding exuberance in favor of a calm, measured hopefulness that we’re seeing the front end of a sustained upswing instead of a short, temporary spike. Should the former prove to be the case, many buyers will be competing for the same homes through multiple offer situations. The above best practices won’t guarantee success, but you’ll know you brought your “A” Game, and, if you lose, you can move on to the next home without regret. But bringing your “A” Game will increase your odds tremendously. Make sure you have an “A” Game Agent helping you so that you won’t feel the deep regret that the above mentioned buyer is now feeling.
Hope you have learn a lot about How to Write a Competitive Multiple Offer.I will be glad to hear your comments.