In a seller’s market like the one we are in, our buyers-customers will likely find themselves at the end of a multi-offer negotiation – unless we help them make their offer stand out from the crowd.
To avoid the disappointment of missing out on a home they love, we can use various techniques to make their offer more attractive to the buyer.
In a recent discussion with Brad Nix, Co-Founder and Chief Operating Officer of Path & Post Real Estate of Woodstock, Georgia, he identified four things sellers focus on and by addressing one or more of these four things we can do highlight our buyer’s offer in a crowded box.
The following is a breakdown of the four areas sellers focus on and how to write offers that are more responsive to the needs and wants of sellers and make them more attractive to sellers.
Maximizing the selling price is often the seller’s top priority. Don’t hold back when the seller’s focus is on maximizing the selling price.
We may only get one shot to compete for the property. Hence, offering the buyer the highest and best price in the original offer is often the best option. Here are some strategies you can use to make sure your listing stands out from the seller who is focused on price.
1. Escalation Clauses
Escalation clauses are a great way to be as competitive as possible on price. They offer buyers the opportunity to win by negotiating multiple offers, even if their first offer price is not the highest price received. Different rules may apply to brokers. So, be sure to check with your broker to understand your options.
2. Guarantees for valuation gaps
The valuation gap guarantees the seller that the buyer will pay the difference between the two if the home values less than the agreed price.
This gives the seller some assurance that the deal will be closed even if the home’s valuation is below the contract price. The feedback gap guarantee can make your buyer’s offer more attractive, even if the competing offer has a slightly higher price.
3. Closing costs of the seller
Offer to pay some or all of the seller’s closing costs. Price is one thing, but the bottom line, net to the seller, is what really matters. Buyers willing to pay part or all of the seller’s closing costs can make themselves more competitive by directly impacting the seller’s bottom line.
Sometimes sellers have certain dates that they need to close in order to suit their circumstances. Buyers, who can be flexible with their own schedules, can stand out from other offers by giving the seller additional control over closing dates.
4. Close the date window
Provide a deadline window that allows the seller to set a deadline within a period of three to four weeks. Sometimes cash buyers assume a quick closing is ideal, but sellers need more time to leave the house.
Flexible closing dates can remove this pressure on sellers and make a buyer’s offer more attractive.
5. Move-out date after completion
After closing, leave space for the seller so they are not at home. We can do this by setting the date when the buyer will take possession of the home sometime after it has closed, or by allowing the seller to loan the home back from the buyer for a short period of time after it has closed.
For example, if you plan to close on Friday and can take possession of the house the following Monday, you can step out of the seller’s room to completely vacate the property without the added pressure of moving and closing the same day.
Understanding the seller’s needs in terms of timing can help us sweeten our buyer’s offer by responding to the seller’s needs or wants.
Salespeople want as little hassle as possible when they close. So if we can eliminate the potential challenges of selling a home, we can position our buyer’s offering to get noticed.
The aforementioned time and price issues will overlap here to some extent. So as we face these challenges, we may also deal with convenience.
6. Actual contract
Increase the convenience of the seller by eliminating concerns about possible repairs required during home inspection. Choose an as-is contract with a short cancellation period to help the buyer avoid the likelihood of major repairs to the property and give the seller the convenience of having the transaction go smoothly for them.
The as-is contract assures the seller that our buyer will not ask for repairs to the home, which gives the seller flexibility and convenience.
7. Seller’s Home Search
Overcome the biggest objection most sellers have now: Not sure if they can find another home for themselves when they sell their own. Flip the typical contingency so that it doesn’t protect the buyer’s ability to sell a home, but rather the seller’s ability to find a new property within 30 or 60 days.
This gives the seller confidence that they will not be left without a home to live due to the contract. What we often find is that once the seller’s house goes under contract, they become less picky because they see the likelihood of making money selling their home and therefore focus on the must-haves in their own house hunt rather than just like-minded people.
Sometimes the seller wants to be sure that the deal will go ahead as it says in the contract. Sellers prioritize cash buyers as these deals are more likely to close, making them more attractive to the seller.
8. Cash offer
Programs like Home Partners of America and Ribbon Home can help us convert our buyers offer into a cash offer that will help them win a multi-offer situation. These programs cost the buyer a little more, but offer the seller the peace of mind that the deal will not fall apart because of the financing.
9. Bridging Loans
Bridging loans allow buyers to take out a loan on the equity of their existing home, which allows them to become like cash buyers by removing the uncertainty of financing.
10. Guarantee / Penalty
Offer a guarantee that, as the buyer’s agent, you will pay a penalty to the seller if the sale does not end on the specified closing date. Mary Maloney, the founder and owner of Hometown Realty, operated by EXP in San Diego, California, told me she offers a $ 5,000 guarantee that the home will close on the appointed date.
She can do this because she has a great relationship with her lender, but she also said that she would rather win the deal on a smaller commission than lose the deal entirely, even if she misses a transaction or two.
It also offers the opportunity to enter into a contract for our client that we otherwise might not have been able to win. We can of course adapt the number of these guarantees to the property prices in our areas.
11. Approved Funding
Get your client’s funding fully approved as soon as possible. When your customers have complete confidence in their financing, explain the risks to the buyer and consider eliminating the financing option.
Removing the funding quota gives the seller confidence that your buyer will close in accordance with the terms of the contract.
Beyond the offer
Anything we do in connection with our buyer’s offer can affect the contract. So if we get impatient with the listing agent or react badly to something, our buyer’s chances are reduced. Here are some ways to build rapport and trust with the listing agent.
Be patient with the listing agent and understand that at some point we will be on the other side of this type of transaction and we want the agents to be patient with us.
If we are on the listing page of a multiple offer negotiation, we should be careful to respond personally to the agents who have submitted goodwill building offers. Unfortunately, someone in this group will receive disappointing news, and empathy from us will go a long way in building relationships and potential future negotiations.
Let the listing agent know that if your buyer’s listing is selected, you will do everything in your power to create a smooth transaction. We can help with this by asking some agents we have co-brokered in the past for a recommendation on what it was like to work with us and we can offer to do the same for them.
Say something like this:
I want to write a quick rundown of how easy it was to work with you and I want you to do the same for me. This is not used for marketing, only agent-to-agent so that when I make a bid in multiple bidding situations, I can provide feedback from other agents who have worked with me to provide the listing agent with the convenience that I have I will do everything I can to create a smooth transaction.
Once you’ve set this up, send it to the listing agent in a separate letter while negotiating multiple deals.
Invite your buyers to write a letter explaining what they love about the home. That personal touch has the ability to create a bond with the seller and differentiate the offer from the rest.
This strategy is not for everyone, but I have seen offers accepted which, due to their connection with the buyer from the letter, had lower prices and less favorable terms from sellers.
15. Go the extra mile
Last but not least, if you are the listing agent for a property with multiple offers, go one step further. If we provide as much information and assistance as possible to the other agents and we are on the buy side of a multiple offer negotiation, those agents will remember the efforts we have made and highlight our buyer’s offer.
Although the real estate market is brand new, we can improve the chances of our buyers by coming up with a deal that helps the sellers directly. Addressing the price, time, convenience, and security can enable our buyers to win the home, and building relationships with the listing agents can do the same.
Jimmy Burgess is the Chief Growth Officer for Berkshire Hathaway HomeServices Beach Properties in Florida, northwest Florida. Connect with him on Facebook or Instagram.