Contract Considerations When in Multiple Offers

Home sellers will always consider offers that have the highest contract price. However, when there are multiple offers with offer prices that are close (or the same) then sellers will look at the terms of the buyer's contract to decide who will win. If there are 3 offers that are only a few thousand dollars apart, then the tightest real estate contract will almost always win. Because of this, it's important to decide which competitive terms you're willing to offer in your contract.

Easy Wins for Any Real Estate Contract (Regardless of Multiple Offers)

  • Present a Pre-Approval Letter from a Reputable Local Lender:

    Not all national lenders are bad (and not all local lenders are great), but most experienced agents have had a bad experience with national/retail lenders at least once. By presenting a pre-approval letter from a reputable local lender, you're assuring the seller & agent that you have a "good" pre-approval since they know and trust this lender.

  • Submit a Buyer Letter to the Home Seller:

    Writing a letter to the sellers doesn't always help, but it never hurts. We'll never know with certainty if the seller will weigh a buyer's letter heavily, but they take little effort and we have seen them help quite a bit in the past.

  • Consider Writing Tight and Standard Terms in Your Real Estate Contract:

    The option period should be 5-7 days, earnest money should be 1-2%, the survey period should be 3 days, the HOA Addendum period should be 7 days, the buyer should pay 50% of the HOA Transfer Fee, & the Third Party Financing Period should be 10-14 days.

Low-Risk Terms for Multiple Offers in the Real Estate Market

  • Third-Party Financing Addendum is “Not Subject to Buyer obtaining Buyer Approval”:

    This means that you're 100% certain that your lender will approve you, the borrower. The appraisal contingency survives this term, in this scenario. It's important that you absolutely trust your lender (and their pre-approval) in order to exercise this term.

  • Write 20%, 30%, or 50% into the Financing Addendum:

    If you have the funds available, present a contract & pre-approval letter that shows that you're putting down 20% or more to purchase the property. The listing agent may ask for proof of these funds, so it's important that you can prove them. You can always change your mind and put down less money later, and it doesn't require a contract amendment to do so.

  • Offer a Seller Lease Back:

    Moving is stressful and seller leasebacks offer a lot of convenience to the sellers. Consider offering the home seller an inexpensive (or free) lease back to help them with their move.

  • Write Tighter, Less Standard Terms (that are still protected):

    Increase the option fee & decrease the option period, increase earnest money to 3-5% (or more), & pay 100% of the HOA Transfer Fee.

Moderate Risk Terms for Multiple Offers in the Real Estate Market

  • Special Provision Language:

    "Buyer waives the right to negotiate repairs or repair credits." In this scenario, you still have the right to walk away from the housing property if there are inspection items you're uncomfortable with. This language communicates to the home seller that you will not ask for any repairs or repair credits after you've had the property inspected.

  • $1000+ Fee for a 3-5 Day Option Period:

    Since the option fee is non-refundable to the home buyer, you're communicating to the seller that you have serious skin in the game. While you can always walk away from the buyer contract if the property inspects poorly, the seller will retain the option fee.

  • Partial Appraisal Waiver:

    As the real estate market goes up in value, many home sellers & real estate agents are concerned that the property will not appraise for the purchase price & standard contracts allow the buyer to re-negotiate or terminate when that happens. By partially waiving the appraisal, you communicate to the seller that you will not walk away as long as it appraises for some price that is not the full purchase price.

  • Waive the HOA Document Delivery Requirement:

    If the property is in an HOA, it's required that we add an addendum that addresses the HOA, resale certificate, and documents. This addendum is a well-known "easy out" and many listing agents prefer to see this loophole closed. We can waive the buyer's requirement that the HOA docs be delivered, which closes the loophole. The addendum also authorizes us to request docs, which the lender will require, so we still request the HOA documents. If the lender objects for any reason, you are still protected by the Third Party Financing Addendum.

Higher Risk & High Impact Terms to Consider in a Buying Contract

  • Buy w/ Cash & Delayed Financing

    If you have cash or liquid savings, you can purchase your new home with cash and use delayed financing to "pay yourself back." Delayed Financing requires a new title policy & another closing, so will cost 1-1.5% in fees.

  • Full Appraisal Waiver:

    By waiving the appraisal completely, you communicate to the seller that you will purchase the property, no matter what value the bank's appraiser places on the property. The risk is that the real estate property may appraise lower than the purchase price, in which case you have to put down more money with the bank in order to be approved for the loan.

  • No Option Period

    With no option period, you're communicating that you will either not have the real estate property inspected or you will have it inspected, but close no matter what (or lose your earnest money.) Many experienced listing agents prefer an exceptionally high option fee to "no option period" (more on that below.)

  • Exceptionally High Option Fee:

    When you offer an exceptionally high option fee, you are communicating that you are buying this house or walking from this high option fee, no matter what. The option fee is released to the seller immediately (not at closing, like the earnest money.) If one offer has no option period and another offer has a $10,000 option fee for 1 day (or even 5 days), the seller will almost always pick the $10,000 option fee. Why? They almost want the buyer to walk away so they can keep the high option fee. (They don't really want them to walk away, but that's a scenario that they're completely fine with because they get to keep $10k!)
It's important to understand that there is no "magic bullet" when presenting offers in multiple offer situations. Sellers will almost always defer to price before terms. However, your offer terms become extremely important when your offer is close to another buyer's.

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