Multiple Offers: The Ultimate Guide from Top Producing Agent

We are exiting the most aggressive sellers market we have seen in our lifetime.  And even though the peak is behind us, the inventory of available homes is extremely low and when a desirable house comes on the market, we are still experiencing multiple offers and they are just as aggressive as they used to be.

I have developed a thorough guide to winning in a multiple offer situation.  Every situation is different and your agent should be advising you on what strategies are best.  If you do not have an agent and you are looking to purchase a house in Northeastern Ohio, contact our team, let us help!  If you are located somewhere else, reach out to us; let us interview agents local to you and put you in touch with a professional.

1. Hiring a truly “good” agent.

In a multiple offer situation, one of the most important things you can do is work with an experienced agent. The agent you choose to represent you can mean the difference between walking away a homeowner or walking away with nothing. A blog post in its entirety could be written on what makes a real estate agent “good”, but that’s not why we are here… In short, it is a person with training, education and understanding of the market; someone who is pleasant to speak to, is quick on their feet, current on latest strategies, explains their tactics clearly and has the work ethic and motivation to make sure your offer is clearly written and presented well.

As soon as you finish touring the house of your dreams, your agent should be reaching out to the sellers agent to find out what is important to the seller. It might be simple things such as seller’s preferred closing date, or choice of title company. The seller may request additional time in the house after title transfer to move out or may want to leave some furniture or possessions… This is a win-win: this information gives the buyer an edge as far as putting together an offer that reflects exact terms the seller wants and shows the listing agent that the buyers agent (your agent) is diligent and professional. I cannot tell you how many times I heard “I have 6 offers on the table but you’re the first to actually call me, so you get bonus points”. Yup… None of those other agents reached out to the sellers agent to find out what is important, but I did; and I already built rapport with that agent. I guarantee that I will have the exact terms the seller wants and the others will not. Not only that, but you would be in shock as to how much information I am able to get sometimes. Down to the amount that will win!

There is a bit of strategy involved during the initial casual ‘chat’ with the sellers agent, so choose your agent wisely.  Years of experience and negotiation tactics are important and the goal ultimate is to tactfully try to ‘fish’ for info and while not always a success (because that agent should not be giving up any of that information) sometimes they do. And that is a win for my buyer.

Finally, while on the phone with the sellers agent, I touch on how professional I am and how easy it will be working with me. We are in a digital age, and that’s great, but a personal touch can mean the difference between ‘taking’ the house or not. If my buyers offer is neck-in-neck with another offer, I guarantee I will take it. And I have had that happen on countless occasions. In fact, I have had sellers agents reach out to me and ask me if my buyer will match another buyers’ offer because the seller and the listing agent wanted to work with me. Because – my professionalism stood out, I assured the agent that my buyer is educated on multiple offer situations; my lender reached out to listing agent proactively to confirm my buyer is highly qualified and will be easy to work with! So get yourself a good agent and go win that house!

2. Clean, easy to read offer.

Your offer should be cleanly put together, without any extras; it should be easy to read, clearly relay the message and all documents should be in order. The seller and sellers agent should not be looking for important offer details such as the ‘info-only’ inspection language or the appraisal shortfall language (more on that below). That additional verbiage is physically typed into the contract or is added in the form of addendum. These clauses have to be worded clearly and strategically so that the buyer is protected. It is not uncommon for a listing agent to receive 16 or 22 or even 42 offers on one single property. Sifting through those offers is very difficult and important additional terms written in by a buyers agent can be easily missed if they are written in an odd place. It is of outmost importance to hire a buyers agent that is well versed in latest strategies and has necessary, clear verbiage ready to be submitted on a separate addendum that is clearly and concisely written so that the listing agent has no questions or doubts about what the buyers intent is. Sounds like it would be common sense, doesn’t it…? But it is not. There are thousands of agents out there that either simply have no idea about the latest approaches or do not have proper training, support, or talent. And sadly, their buyers are not winning any offers. Not to sound like a broker record, but having an experienced agent represent you can mean the difference between buying a house or not.

3. Have your proof of funds ready.

Many buyers mistakenly think that they can get pre-approved in a matter of an hour. You know you qualify, I know you qualify, but the seller will not take our word for it. The very first step when looking for a house is to obtain a pre-approval. A Pre-Approval, not a pre-qualification. First, no seller will consider an offer without a pre-approval; second, many sellers require pre-approved buyers only. And third, your Realtor spends her/his time showing you houses, the courteous and ethical thing to do is to have your pre-approval in hand. A pre-approval can take a day or two or three (or more) to be issued by a lender, and if we find your dream house on a Saturday or a Sunday, we may lose that house because our paperwork is not ready. Sellers will NOT consider an offer that does not have a true pre-approval and sellers agents often reach out to the loan officer to confirm that the pre-approval is solid and has gone through automated underwriting approval (Desktop Underwriter or Loan Prospector). That process does take time, but having a solid pre-approval will mean having an edge over competition with other buyers.

4. Choosing a lender.

Similarly to working with a good Realtor, you should be working with a good lender. Make sure your lender has a direct line of contact, an email address and a cell phone number that receives text messages. Also, make sure that the lender can be reached on an evening and over the weekend. Going back to finding a house on a Sunday evening – you may need to reach out to her/him over the weekend. Finally, just as your Realtor is reaching out to the sellers agent, you lender will need to reach out to the sellers agent as well.

To make things easy (and because I know what needs to be done for your offer to stand out), I have prepared language that I send to my buyers’ lenders to send to sellers agent. I prefer the lender actually calls and assures the sellers agent voice-to-voice, however it is not always possible on a “hot” property. However, for me to control the process, I need to be able to either reach the lender or have that lender return my call in a timely manner. A good sellers agent will physically reach out to the your lender to verify that the pre-approval is valid, and has gone through automated underwriting approval.  By having your lender reach out proactively with this info, we stand out and increase our chances of winning that offer! A lender that easily accessible and follows directions is a huge asset. You may choose to work with whom you like, but if you need recommendations for a good lender, please check out my list here. I do not benefit financially in any way from these lenders, but all of these loan officers have impressed me with their diligence, communication and reachability.

5. Offer a competitive price.

If a seller wants $450,000, don’t offer anything below that. Initial offer price shows intent; communicate your seriousness with a strong, aggressive starting price and use an escalation clause, which is a must in a multiple offer scenario.  As a sellers agent, I have received too many offers with an escalation clause (more on escalation clauses below) that offers $50,000-$70,000 over asking price, but the initial offer is $20,000 below asking price. Guess what – others are submitting similar escalation clauses and they are coming in significantly above asking price. Even if your escalation clause is higher than the competition, the seller will not have a good impression at all and may not want to work with you. Offer a good, aggressive, and attractive price that shows intent and desire to buy the house. Don not offer less than asking price and tell the seller you are willing to pay $70,000 more, but not quite just yet. That is looked upon as ‘playing games’ and I guarantee, the seller will not react well. Especially if there are 6 or 10 or 40 other offers.

6. Earnest Money.

A good earnest money offering communicates intention. The general recommendation is to offer at least 1% of purchase price. However, the higher the amount, the more serious you come across. With that said, a buyer could offer a 10% earnest money deposit, but if the offer is low, the high earnest money deposit cannot help you win. It will definitely make your offer stand out if you are in the top two or top three offers and will sweeten the deal, but will not ‘take’ the house.  Ask your agent about what is customary in your market.

7. Escalation Clause.

An escalation clause is a fairly new concept and can be used effectively to win in multiple offers. Lets get into what it is and what it is used for:

We do not know what the highest and best offer another buyer has made, so one way to strategically beat out the competition, is to use an escalation clause that says that you (the buyer) will beat any other (higher) offer by $1,000, but not to exceed a specific amount. So for example, if a house is listed at $450,000 and your offer includes an escalation clause up to $500,000, you would offer $1,000 more than any other offer that seller has received but no to exceed $500,000. So if a highest competing offer came in at $492,000, your offer is $493,000… If another offer came in at $507,000; you’re out since it is over $500,000.

A couple notes on escalation clauses. It is a double edged sword. It allows you an opportunity to win, however you may be beating out a much weaker offer. Per escalation addendum that your agent will write up, the seller must provide a copy of the offer you are overbidding, but they do not always. In fact, the seller does not have to honor the escalation clause, and may simply make a counter offer to you at your maximum price, this doesn’t happen too often, but does happen on occasion. While I implement the escalation clause for most of the offers for my clients, and have won multiple houses with its use by simply beating the highest offer the seller has received, this strategy is not perfect and can be used by sellers to their advantage. But… my buyer walks away with a home… Another note on securing a good, experienced agent to represent yo: some agents have no idea an escalation clause exists. Too many times a buyer finds me online and requests I represent them and once we find a house and discuss strategies, they express their frustration that their former agent did not tell them about any of the tactics I am sharing… Get. A. Good. Agent.

Last quick note; not every sellers agent allows escalation clauses. Imagine going through 42 offers figuring out who escalated who and by how much. Its not as difficult as it sounds, but is a lot of work and some agents are either not educated on escalation clauses or do not want the hassle and headache…

8. Seller approved closing date.

This should already be known based on your agents conversation with the sellers agent. In a multiple offer situation, give the seller the closing date that they need. If possible, make whatever arrangements you must to accommodate this request. They may want to be out in 30 days or may need 45 days so they do not feel rushed, whatever it may be, its an easy way to look ‘accommodating’ to the seller.

9. Seller approved possession date.

Similarly to closing date, the seller may need to stay in the house for a week or two after title transfer, or months on a rare occasion; if this arrangement is possible with your situation, do make the effort to accommodate the seller. It may be as simple as giving an extra week or two for seller to move out, or needing to ‘sell’ their home in order to buy a new house with the sale proceeds and extra time is needed. Or maybe the seller is building and they want to stay in their house until the new house is built. If seller needs possession for a week or two or even three, in an aggressive multiple offer situation, my suggestion is to offer the seller to stay in the house at no charge. If we are discussing weeks or even months, some kind of a rental arrangement may need to be put together. Your agent would be able to advise you on available fair options. The terms should not be too intimidating to the seller, but fair and attractive…  Should a rent-back period be established or if the seller is staying in the home rent-free, make sure your agent has a specific addendum to contract specifying what happens and how during sellers occupancy after title transfer – there should be some kind of a security deposit, renters insurance and specifics on who covers utilities and who is responsible for damages.

10. The least number of contingencies.

The standard purchase agreement will have multiple contingencies or provisions on which the purchase is dependent. Most common are financing, appraisal and home inspections. We can manipulate these contingencies to stand out and make our offer more attractive.

  • Financing.

    If you are a cash buyer, awesome, your offer is not contingent on financing. If you are borrowing though, your offer is contingent on financing. Your paperwork must be in order and your lender should have already reached out to the sellers agent to assure them that you are an A+ buyer. Discuss numbers with your lender in detail, make sure you know how much cash (in form of a wire transfer) will be necessary at closing and what your monthly payment would be.

  • Appraisal.

    Talk with your lender about possibility of a waived appraisal. If that is not possible, lets talk about what we can do. Every lender, prior to actually lending money, will send out an appraiser to the property to make sure that property is worth the amount you are paying for it. Even if you have over 20% down payment, the property must appraise for full, total purchase price. That means if you are buying for $500,000 and putting down $100,000 for a down payment, the property still, must appraise for $500,000. During a sellers market, prices are raising rapidly, but the comparable sold properties are far and in-between. Agents know this. Good sellers agents know this. Good buyers agents also know this and realize that, yes, people may be offering $50,000 or $70,000 over asking price, but the house needs to appraise for that buyer to be able to buy it (or the buyer needs to have the difference in cash). So just because the buyer is offering $575,000 on a $500,000 house, does not mean that the lender will approve the $575,000 purchase price.

    Back in the day, the appraisal results would come in low and we would ask the seller to lower the purchase price to the appraisal value because, well – the house is not worth the contracted price based on a professional opinion of a licensed appraiser. However, in todays market, everyone anticipates that appraisal may not come in ‘at contracted price’, so a good buyers agent would proactively include an appraisal clause. An Appraisal clause states that the buyer is willing to bring additional funds to closing to cover all, or part of the difference between purchase price and appraised value. So a ‘full appraisal gap coverage’ means that any and all of the difference between purchase price and appraised value will be covered by the buyer in cash. If that gap coverage is capped, then the buyer is only willing to bring up to that cap, which could be $15,000 or $20,000 or $50,000 in additional funds to closing for the potential gap.

    In the following example, if buyer agrees to cover the full difference between appraised value and purchase price, than they would cover the whole difference between contract price and appraised value. On a $400,000 purchase, with a 20% down payment, should the house appraise at $360,000 the buyer would need to have $80,000 in down payment funds (20% of $400,000), $4,500 in closing costs AND an ADDITIONAL amount that reflects appraisal gap which in this scenario is $40,000…. In this example, the buyer would need $124,500 in readily available funds for closing.

    If the appraisal gap coverage was capped at $20,000 and the house still appraised at $360,000, then the buyer would need to have $72,000 in down payment funds (20% of $360,000), $4,500 in closing costs AND an ADDITIONAL $20,000. So total funds to closing would be $101,500; this is assuming the seller agrees to reduce the purchase price to the appraised value of $360,000.

    Lastly, lets say, the buyer capped their appraisal gap coverage at $20,000 on that same $400,000 purchase, but the appraisal was only short $6,000, the buyer ONLY brings in the $6,000 in additional funds, not the full $20,000. In this scenario, buyer will need $80,000 in down payment funds (20% of $400,000 purchase price), $4,500 in closing costs AND an ADDITIONAL $6,000. So total funds to closing would be $90,500.

    Now… Does the appraisal come in considerably low often? No… But it does on a rare occasion. Is it important to ‘cap’ the amount you are willing to bring to closing to cover the potential gap? Yes… Does your competition ‘cap’ it? Not always. It will very much depend on how desirable the house is. There are many buyers out there walking around with cash that need a house and are willing to cover the full difference. My suggestion is to write in whatever works for your budget. Anything is better than nothing. I have won offers with a $4,000 appraisal gap coverage that my buyer was willing to cover and I have lost offers with a $50,000 capped gap coverage because another buyer said they will cover any potential difference.

    Is appraisal gap language necessary? Yes, it is critical. If you can afford it financially, it is a must! Here’s why. If a buyer makes an offer, any offer, it essentially means nothing because the house must appraise in order for the creditor to lend that amount. The buyer can offer any amount they want, even $700,000 on a $350,000 house, but the lender will need to verify that the house is worth that investment. Without the appraisal gap language, the purchase price will end up being whatever the appraised value will be… With the appraisal gap language, whatever the amount the buyer is willing to cover is additional money in sale proceeds for seller, therefore making your offer stronger and more attractive. Because you are not simply throwing out a number, but rather are willing to back that number with additional funds, the seller sees seriousness an intent. In my experience, it is practically impossible to win a “hot” house without an appraisal clause.

    Lastly, but very importantly – this clause must be CLEARLY stated to communicate what your intentions are. This can make or break the deal; your do not want to confuse the sellers and the sellers agent and the more confusing it looks, the less attractive your offer is. I once received an addendum that stated “Should the house not appraise, the buyer is willing to restructure their loan”. The buyers agent said this meant the buyer is willing to cover full appraisal gap with their own funds. Is that what you are getting from that statement? Me neither… and the only reason I now know this buyers intentions is because I found this language buried on page 6 of the purchasing agreement and called the buyers agent to ask what that meant. Not every sellers agent is as diligent and thorough or simply has the time to clarify and ask questions. That particular house only had 6 offers so the number of agents and loan officers to reach out to was manageable and the case may not be so on a house that has 24 offers… Is my message clear yet? Get a good agent to represent you!

  • House Sale Contingency.

    Another contingency you may have is the need to sell your house in order to buy another house. This one is hard. If you are going up against several offers, it will be very difficult to win if your offer is contingent on the sale of you home. I realize in some instances there is no other way and in those instances, it is best to list your house for sale, secure a buyer, have that buyer do inspections/appraisal and be ready to close while you look for a house. That way when you do find a house and a seller is willing to consider your offer, at least your house is already under contract and is ready to ‘close’. Best option would be to find temporary housing. Sell your house and rent month-to-month while you look for a house. Unfortunately, it is EXTERMELY difficult to win in multiple offers with a house sale contingency. My suggestion is to look for a house that has been on the market for 4-7 days and before spending time looking at it, having your agent reach out and ask if the seller will consider an offer that is contingent on a sale of your home.

11. Home Inspections.

Home inspections are very important and I, highly recommend every buyer gets a thorough home inspection when purchasing a real estate property. With that said, it is also my job to go over options you have when making an offer and to inform you, the buyer of what your competition is doing. Even though it is not recommended to buy a house without any home inspections, some buyers do. A purchase offer from a buyer that is waiving home inspections is (as you may imagine) very attractive to the seller. This offer essentially says, here’s my money and as longs as I can get a loan, I’m buying the property. In our local market, I see these offers quite a bit. Especially on more recently built houses, like those built in ‘80s, ‘90’s and newer… Even though it is not advisable to waive home inspections, the buyer that does, usually takes the house, provided his/her offer was comparable to others in price… Discuss the pros and cons with your agent.

Second best option when it comes to home inspections is to make your offer contingent on home inspections but to state that the inspections are for informational purposes only. This is where having a good agent comes in as well; there should be some language that lets you get out of the contract if serious health or safety issues are discovered. These may include structural issues, fire hazards, moisture issues, mold, severe termite damage and so forth… It is a great clause that I use on almost all of my offers and I tweak it to be very aggressive and more attractive to the seller or more vague and offer more protection for my buyer depending on the situation. The choice of wording heavily depends on the specific house and the buyers comfort level as well as cash reserves.

Lastly, consider the number of inspections you are asking for. Discuss this question with your agent, however the recommendation is to ask for the general inspection only. Assume the house has Radon and assume you will need a professionally installed Radon mitigation system (or two). Speak with your general home inspector and confirm, but most good inspectors will be able to identify possibility of pests or wood destroying insects and possible presence of mold. If the house was built prior to 1978 or shortly after, assume lead based paint is present. With that said, if the house has a septic system and/or well water, in addition to general home inspection, those two inspections may still be recommended. Those systems can cost thousands to replace if they do not work properly. Talk with your agent and speak with a home inspector about possible risks associated with buying without doing any inspections or with only limited inspections. Chances are, an experienced home inspector is always doing inspections in that neighborhood and can possibly shed some light on potential issues that exist in a particular community. However, buyer beware, no two houses are alike and even though most houses on the same street may not have a problem, one single house may have unexpected issues.

12. Don't Ask for Unnecessary Items

The goal in a multiple offer situation is to stand out as the most low-maintenance buyer. Don’t ask the seller to pay for things like home warranty or to leave their washer and dryer even though the seller is not marketing those as included items… Having a home warranty is great but that $600 expense is not worth losing the house over. And yes, if the competitors offers are really close, that silly $600 may lose you the house.

13. Do Not Set an Offer Deadline

Do. Not. Just don’t. The competition is fierce and yes, the seller may stretch out the showings for several days even though they have received multiple offers in the first 24 hours and it IS frustrating to have to wait four days for a response, but in a multiple offer scenario, sellers do what they want. Trying to bully the seller into accepting your offer will not work. Threatening to ‘walk’ if the seller does not respond will also not get you anywhere. This type of behavior does not show good faith, does not build rapport and will not win you a house. What they may do is take your offer and ask another, more well-behaved buyer to match it. That’s about it. Now, if, and only IF your offer is all cash, significantly above asking price with minimal inspections or no inspections at all, you may certainly try to set a deadline. If your offer is THAT great, then sure… But, if there is another offer that’s a close second, I will repeat again, the sellers agent may ask that second offer to match yours and they will take the house.

14. Personal Letter

A good heartfelt personal letter to the seller goes a long way. However, it may be a major issue for fair housing laws. A seller cannot choose, or not choose your offer based on any protected characteristics under the Fair Housing Law. Writing the letter is risky. If you choose to write one, don’t talk about yourself, talk about the house, the sellers choice of updates, décor, etc.. Don’t touch on anything that has to do with your race, color, religion, sex, age, national origin, familial status or a disability.

15. Covering Sellers Closing Costs

In addition to an already awesome offer, you could cover all or partial closing costs on behalf of the seller. Be careful here and consult your agent; sellers closing costs include title company fees, county fees, unpaid property taxes and selling commissions. It is very expensive to sell a home. If you choose this option, my recommendation is to set a ‘cap’ to the expense. Something like “buyer will cover sellers closing costs not to exceed $X”. This way the seller nets more money and the buyer is protected just in case there is an unforeseen expense that is rolled into sellers closing fees. Why not just offer a higher price you may ask, well, because the house does not need to appraise for that higher price, instead, the price is lower but the seller will receive same net proceeds because buyer covered their closing fees.  I have won several multiple offers with this strategy.  If used property and correct language is used to protect the buyer from unexpected expenses, this tactic is quite effective.

Finding a Good Agent!

Talking about this twice because it is that important. Not every Realtor is the same, even if they “have been doing this for 20 years” and not every broker that Realtor belongs to is the same. Some agents that have been in the business for many years refuse to evolve; they may be stuck in their ways and will come across ‘difficult’ to the listing agent juggling 24 offers. Not every broker is the same; some brokerages attract agents to come work for that broker with higher commission splits and seriously lack in education and training. When I represent a seller and act as a listing agent, I am in shock at how terribly written some offers are that I receive. It is an incredible disservice to those buyers; in this fast-paced market, those buyers do not stand a chance…

You could be a very desirable buyer with significant cash reserves and have a decently written offer but your agent may lack in presentation skills, may not be soft-spoken or have a bad attitude. All these things can cost you a house. The sellers and the sellers agents not only choose a buyer but also choose a buyers agent.

Your agent is the ‘face’ of your offer and it matters whom you choose to represent you and to ‘sell’ you as an awesome buyer. Nobody wants to bicker through a real estate transaction process with the other side; the sellers agent is interviewing the buyers agent to make sure they are professional, solution-focused, have educated their buyer and will work to close the transaction and not create problems.

Sellers not only choose the buyer but also the buyers agent. In your line of work you also probably have people you dread working with; similarly to that, sellers agents do not want to work with someone they perceive to be difficult or rude. Your agent is there to represent your best interest.  Ensure that you hire someone with experience, diligence and a personality to get you the house of your dreams.

Local to North Eastern Ohio, let us help you!  Or let us help you find an agent that can win you the house of your dreams – I have a large network of agents throughout United States.  Let me put you in touch with one of those agents, or let me interview a professional for you and make sure they can do the job.  I know what questions to ask to determine if that person is cable, experienced and has the right personality!  Get in touch with me to get matched with an awesome Realtor!