You’ve been watching the market and paying attention to how the houses in your neighborhood are performing, so I’m sure you’ve observed the “multiple offer situation” that we’ve been seeing a lot of lately in Austin and in many of the surrounding areas. A multiple offer situation is usually good news for a home seller, but it’s definitely going to cost you more as a buyer so I thought it would be beneficial to you to know a few things about this subject!
When a closing price jumps unexpectedly, it could (and usually is) due to something we call the ‘Notice of Best and Final.’ The Notice of Best and Final is a tool that can be utilized by the listing agent and is almost always used when there is more than one offer on the table. An experienced real estate agent will use this strategy in order to win the best price for their client, the seller. The notice instructs all buyers who are interested in the property to submit their ‘best and final offer’ or ‘highest and best offer’ by a deadline which is usually 24 hours. We in the business like to call this the ‘multiple offer sudden death’ and here is how it works:
The Sellers have a home on the market with an asking price of $420,000.
Buyer 1 is interested in the home and makes an offer of $410,000.
After a few rounds of negotiations, the seller and Buyer 1 near an agreed price of $416,000 when all of a sudden……
….Buyer 2, not knowing that the Seller is nearing an agreement with Buyer 1 submits her own bid for the property. (Keep in mind that at this point, the Seller and Buyer 1 have not yet signed any agreements, therefore the seller is under no obligation to Buyer 1.)
After discussing options with his agent, the Seller decides to initiate the ‘Notice of Best and Final’ and gives both Buyer 1 and Buyer 2 a deadline of 24 hours to submit their last bid.
Buyer 1 begrudgingly ups her offer to the full asking price of $420,000.
Buyer 2 is aggressive and raises her offer to $429,000—and her offer is the one that is finally accepted.
In this scenario that I’ve just painted for you, Buyer 2 not only paid $13,000 more than Buyer 1 was about to pay, but she also paid $8,000 more than was needed to beat Buyer 1’s top offer. The Seller has some great news to celebrate, while both Buyer 2 is feeling less excited since what started out as a great deal has just become so-so in their eyes…and Buyer 1 is completely let down!
Seeing this happen multiple times has taught me a valuable gem of wisdom, and I try to impart it on my buying clients…do your best to remain emotionally detached from the house until it is signed, sealed, and delivered. I suggest that my buyers work closely with me and determine a value that they believe the house is worth, decide ahead of time what they are willing to go up to, and stick to those numbers, no matter what happens.
Housing Markets Recovery Tempts Sellers—why it is important to have a Real Estate Professional on your side
The housing market’s recovery is still establishing itself, it’s not in its infancy but it still has a way to go until we can call it mature; the majority of professional predictions remain mostly positive for the rest of 2013, and this young housing recovery is being supported by low mortgage rates.
The recovering market, coupled with lower rates could easily lull prospective home sellers into the assumption that they will have a simple selling process, but upturn or not, it’s no time to take your eye off the ball! Home sellers should still take as much care as before—especially when it comes to choosing a real estate professional to represent their property and their best interests. I recommend that sellers do the following: Ask. Watch. Check. I’ll explain now!
Ask: Don’t be afraid to interview multiple candidates for the job of selling your home; ask each candidate for evidence that they have plenty of experience in selling housing that is similar to yours. Experience will shape the direction of the marketing and all the other decisions that will be brought on your behalf. Remember, your home’s sale is not the time to depend on trial and error…you want an experienced team of professionals on your side!
Watch: From the minute you meet a potential candidate to sell your home and become your representative, look for the kind of confidence that will resonate with potential buyers; housing choices are important to each and every prospect and they are bound to feel more comfortable when the representation of their next home is being handled by an obvious pro! If an agent isn’t displaying the skills when you interview him or her, how likely is it that they will do so later on?
Check: If you’re satisfied with the answers to your questions, and like what you watched, check into the candidate’s community ties as the final decision making step. A real estate professional who has established solid connections in their community will provide you with instant exposure when it does the most good; a lively website and active team are more evidence that you are headed in the right direction toward a solid choice!
Don’t be afraid to be inquisitive when you are looking for your real estate agent to sell your home…they will be your partner in business; the more questions you ask, the more you will learn, plus, you’ll demonstrate to your agent that you are a focused client!