Every buyer wants to avoid a multiple offer situation if possible.
We prefer to negotiate directly with the owner, one on one. It’s programmed into our genes to want to start off low, see what the seller comes back with and maybe meet in the middle if it works for us.
In a busy market though, a one on one negotiating scenario can actually be pretty hard to come by. When buyer demand is high and houses are attracting interest from multiple buyers, you may only get one chance to submit your best offer. And if your offer isn’t the best of the bunch, you probably won’t get the chance to negotiate.
Should you just wait for the market to change?
As a buyer, it can be tempting to try and wait for a time when the market is quiet and there are fewer buyers around, with the hope that you will avoid a competitive situation. The only problem with this approach is that you might be waiting a long time.
Good houses sell well in any market. If you want to buy a sunny home near good schools then you will probably have to compete with other people to buy it. No matter what sort of market we are in.
Plus, it’s smart to buy a house that other people like.
Sought-after properties sell quicker and can achieve higher growth in value due to their popularity.
Ok, so how do you approach a multiple offer situation, then?
Ask the right questions.
Information is your most valuable resource when buying a home.
Ask the salesperson for a detailed explanation of their multiple offer process. Ask when your offer will be presented and when you can expect to receive an answer back from the owner.
Before making your final decision on price, ask the salesperson:
“Have you received any other written, signed offers on this property? Or are we the only one? Are we allowed to know how many other offers have been received?”
Keep in mind: Houses can sell before their advertised deadline (if there is one). So as soon as you have interest in any property, be sure to tell the agent you are working with so they can let you know if the situation changes.
When it’s time to offer, find your ‘walk away’ price.
In other words, the highest price you are prepared to pay for this property.
If you are in competition there isn’t much point in making an offer and leaving a certain amount in reserve in case the owners come back to you. If you are not the highest offer you are unlikely to have the opportunity to negotiate anyway.
Put your best foot forward and offer your walk-away price. That’s the price at which you can walk away knowing you gave it your best shot. If another buyer is prepared to offer more, then good luck to them!
Keep the big picture in mind.
How long are you planning to stay in this home? When deciding what to offer, every thousand dollars seems like a big decision. But most people who already own a home can look back at their purchase price and honestly say they wouldn’t mind if it had been $10k higher or lower.
What matters most is that they got the home they wanted.
Find your closest comparable sales.
Knowing what similar houses have sold for in the last 3-6 months is the tried and true best way to accurately understand real estate values.
Ideally, you should start looking well before you are ready to buy. Even before you have finished saving a deposit. Look at 15 or more properties that would be in your target price range, guess what they will sell for then find out the actual sale price and see how close you got.
Always remember this phrase: “Buy with emotion but justify with logic.”
A ‘great deal’ and a ‘great house’ don’t often go together.
Buyers naturally want to get the best deal they can and love any opportunity to negotiate. But the more attractive a home is, the less negotiating leverage buyers will have.
If you are determined to pick up a bargain, then you might end up missing out on the best houses in your target area. Why? Because the best houses attract competition.
You are far better off buying the right house at market value than buying a house that isn’t ideal for a bargain.