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.
9 thoughts on “How to Write a Competitive Multiple Offer in Austin TX”
Excellent article Steve – I especially like your #1 – the “regret point,” and in fact, I may just start discussing it in those exact terms. I recently lost a multiple offer scenario because of placing too many contingencies in the offer – like every one possible, other than being contingent on the sale of the buyer’s home.
It’s a fine line – I knew it wasn’t going to fly – especially after we had just revisited during an open house with no less than 18 other car-loads of potential buyers waiting in front. But, I had firmly expressed my professional opinions, and didn’t wish to “argue.” So… we moved forward with our “practice offer.” The “lesson” was learned.
Of course, an aside to this, is that many buyers (in Seattle at least) simply don’t believe agents when they say things are, or already have, transitioned to a seller’s market in many areas. It’s going to take a while for the bargain buyer mentality to abate.
Your blogs are so informative, wise and the best all around. Thanks for this one as its really the best approach to take when your in this predicament.
Great post, Steve.
I can tell you as a listing-only broker that handles 150+ annual transactions, unprofessional buyer agents on the other side of the deals are by far the worst part of the job. In fact, in recent years as the market has been so slow, I’ve frequently considered leaving the business rather than having to deal with the incessant complacency and incompetence of professionals that claim to help buyers of real estate. (So many buyer agents dislike me and my caustic responses by this point, I’ve decided to stay in the business just to continue ruffling their feathers).
Few people choose to get into this business (it’s often a second or third career), and even fewer of those people got into the business to work primarily with buyers. It’s no secret that good agents generally move to listings as quickly as they can, as they can better leverage their time and have dramatically increased likelihood of a pay day versus working with buyers that may drive around for days on end without buying anything. Not to mention the role of a listing agent tends to carry much more respect from your clients (owners). But what residential realty creates is a ‘moral hazard’ situation in which only the worst performing agents are those agents that buyers have available to them. I know this is a drastic statement, and apologies to the very few buyer agents out there that are worth their salt (they know I love to work with them), but here is what I typically see and are my biggest pet peaves from the listing side:
1. Agents who never phone call when sending an offer. We’ve found offers, days later, in our spam folder from agents who didn’t call to advise us an offer was coming – nor did they bother to check back with us after we didn’t respond promptly, acknowledging their offer. Not reaching out to a listing agent and establishing some kind of rapport up front is a huge negative and practically a SURE sign that the deal is not going to go through. EMAIL IS FINE (and actually preferred to the phone), by the way, but if you haven’t seen a return email from me prior to sending your offer, make sure to accompany the offer with a phone call.
2. Agents who blatantly disregard comments in the MLS. I don’t care what people say, the listing agent and seller get to pick the title company. Seller pays for the dang thing, and you can call the TAR attorneys and they’ll all tell you that seller gets to pick unless buyer wants to buy. End of story. So you didn’t bother to indicate my title company on the offer? You’ve just done your client a major disservice, because it’s a point that the seller will never agree to change, and what did you gain by trying to change it? Buyer agents do not get to pick the closer; quit wasting your time thinking you will.
3. Further, want to lard down your offer with baloney contingencies? How about this one: “Seller to provide response with 30 seconds of receipt of offer”. SCREW YOU! I will provide you a response in whatever fashion I deem appropriate, and it may take a day, two days, or if your offer stinks – NEVER. Here’s the truth: I am looking for the offer that is going to sell my client’s property for the best price in the shortest amount of time. If you think an offer below asking price is going to be accepted because you insisted that it be responded to in a certain period of time, you are wrong. If anything, I am hoping another buyer comes along with an agent who has more respect for the process, and doesn’t treat me and my client like imbeciles.
4. Don’t ask the seller to buy a new survey if they can’t find their own. We’ll be happy to look for one for you, but if we can’t find one, expect to buy your own. Aren’t you the one getting the loan at the title company that needs a survey to insure you?
5. INCLUDE A PRE-QUAL WITH YOUR OFFER. I don’t know your buyer from Adam; why are you making me ask you for the most basic of evidence that your client can borrow a pack of chewing gum, much less a house?
6. Don’t offer less than $10,000 below asking price. For all of my listings under $250k, I get advance approval from my sellers to instantly reject lowball offers; advising agents that my client has rejected their offer without counter. In addition, my clients and I will look askance at any further offer from this buyer, since they have already tarnished the brass chime of reasonability. Most good listing brokers price their properties fairly. There may be some wiggle room, but it isn’t more than $10,000.
7. Close in 30 days MAX, offer 1% earnest money, $500 option fee, and agree to a 7 day option. Okay, I realize I am not going to start seeing offers with these terms unless the market really gets tight, but I am demanding them in cases where we have a hot property that I know will sell quickly. Why should I let you tie up my listing for a measly $100 – for 10 days – only to cancel on day 10 because you got buyer’s remorse, or you read that the duplex doesn’t have a firewall between the two units (hint: not a single duplex in Austin does)? To the greatest extent that I can, I am going to force buyers to put skin in the game and make it hurt if you cancel for no good reason.
Silly buyer agents who don’t have the respect of their clients make the mistake of assuming I perform the same limited role for my clients; ie a warm body collecting paperwork. This is obvious when agents bark commands at me, throw me attitude, or in the case of one sad sack agent who competes in my niche – has filed two complaints with the Texas Real Estate Commission against me. Apparently he doesn’t understand that TREC is not in existence to arbitrate complaints between agents – it is there to protect consumers and clients of agents. TREC threw out both of his complaints, of course, because the individuals involved who were my clients had absolutely no qualms with my representation. Some agents just play dirty when they can’t win on the field.
The reality is that I – and other listing agents – are often pivotal in 95% of the seller’s decision-making process on what to do with that buyer and buyer agent’s offer. That’s because unlike most “order taker” buyer agents, my clients see me as a professional service provider that they’ve hired specifically because they know I can get their deals closed quicker and more efficiently than they can.
If buyer agents would just learn to show more respect and work within the system, many more successful deals (for both sides) would transpire, and this industry would be a lot more fun and profitable (for both practitioners and consumers).
Glad you got to get all that off your chest! I know what you mean, with certain buyer agents. I recenlty had one wanting me to “prove” that I had presented an offer to the seller, and tried to bully us into only providing written responses directly from the seller. Agent actually expected me to forward emails from the seller to the buyer agent, so the buyer agent could forward to the client.
I just kept saying, “seller is being presented all offers, and we don’t share private agent/client communication with the other side of the deal”.
Some buyer agents also don’t understand that good listing agents don’t negotiate “repairs”. We’ll discuss an “amount” following an inspection, but I don’t let sellers get dragged into a dissection of the buyer’s inspection report. All I want to know is “does the buyer still want the house?”, and is there an amount necessary to grease the skids a bit.
Sylvia and I do enjoy helping buyers though. It helps us better understand what’s going on in the minds of buyers when we are the listing agents.
And here I was thinking only in SF did we have to work with clients to help them understand what makes for a great offer in a competitive-multiple-offer situation.
Nicely laid out article… and while all of these points definitely apply to a competitive offer, I think the real takeaway is that any offer an agent makes on behalf of their client should demonstrate that the agent making the offer is competent and professional! It sounds obvious, but as noted, sloppy offers happen more than one might guess.
Steve, the post was to the point and very informative. What struck me the most was location…you’d think a California customer would be relaxed and not so forceful in an ambient environment in which she/he could relate (Starbucks channeling upscaled Lattes’ akin to CA mobile lifestyle). At least it turned out to be a valuable learning experience for us readers!
Thanks everyone for your comments.