How to break the tie in a multiple counter offer scenario…
In today’s real estate market in Southern California, when a listing is priced right, it is common for a buyer to have to compete against several other buyers to obtain an acceptance on the home they desire.
Often, a seller, through their listing agent, will use a “multiple counter offer” strategy when they have a handful of offers to choose from. This is usually the final chance for buyers to “pitch” themselves, but many don’t take advantage of this opportunity to distinguish themselves and move ahead of the pack.
Here are some helpful tips that can help you compete better against the other offers, which will increase your odds dramatically at obtaining an acceptance. Let’s pretend we are a buyer who is competing against 5 other offers…
Counter the multiple counter.
The trap the buyers with less savvy real estate agents fall into is thinking that once they receive the multiple counter, they should simply sign it and send it right back. In fact, a buyer’s response can present counter points for a seller to have to agree to. Why would a buyer do this? Doesn’t this hurt their chances by creating an extra step to the counter process? Nope. In actuality, this helps their chances.
As I mentioned, many buyers will simply sign on the dotted line and return that counter. But we’re going to present a counter that is even more favorable than what is indicated on the multiple counter form. Of the five other offers, perhaps three will have signed the multiple counter offer as its written. Instantly, we’ve reduced our competition to two buyers.
Increase your offer price.
The annoying multiple counters are the ones that say “buyers to submit their best and final offer.” This is tough because we can’t get a read on the offers in play in relationship to ours. If we don’t have a sense of what the other offer prices are,we’ll use our best judgment and offer a maximum purchase price that stays within our comfort and qualifying range. I prefer when the multiple counter offer gives an actual price. “Purchase price to be $1,250,000,” as an example. Here, the seller has determined the pricing threshold the buyers are going to have to come up to in order to be eligible for acceptance. But just like with the point above, many buyers will simply agree to this new price. If we are one of the three remaining buyers, and all three of us counter at the same exact price, a seller is going to look elsewhere to break the tie.
To hedge our bet, and in guessing one of the remaining three will agree to the exact price, we will want to increase our price, even slightly, in our counter response. An extra $5,000 or $10,000 amortized across our 30-year loan will probably be a negligible blip in terms of our monthly mortgage payment. It’s worth coming up in price, therefore, to break the tie, and bring us one step closer. Now we only have one buyer remaining who we are up against.
Make your terms more favorable.
There are various terms within our purchase contract that we can counter to be more favorable and sweeten the deal for the seller, but still do not compromise our rights, entitlements, and integrity in the deal. Instead of a 17-day buyer’s investigation period, let’s reduce this to 10 days. This still gives us more than enough time to conduct our inspections and determine the condition of the home, but offers a more expedited timeline that a seller would appreciate.
Let’s get rid of that wood destroying pest, or termite, inspection we asked the seller to have to provide. Many termite companies will offer free inspections. And it is in our right as the buyer to have this inspection, and to request a repair or treatment with any findings once we are in escrow. But by removing this as a seller-obligation up front, we’re being creative in how we are sweetening our deal to break the tie. Why don’t we just pay for our own home warranty? It is customary for a seller to pay for a one-year home warranty policy for the buyer, but by not obligating the seller to this, it’s a few hundred extra dollars of savings for them which they appreciate.
Again, I wouldn’t necessarily suggest waiving this up front in an initial offer. Sellers do tend to accommodate the home warranty term, and this in itself wouldn’t be a deal breaker one way or the other. But at a point at which we are competing against multiple other buyers and looking for ways to position ourselves more favorable, this is just another example of what we can do proactively to increase our odds.
There are many other fantastic strategies we implement that ensure our goals are met and our clients are happy. But I hope this gives some quick insight into this process for those out there who may be frustrated by the competition in the market right now.
For some additional strategies, or to brainstorm any of your real estate needs, feel free to contact us at any time.