How Home Buyers Lose Multiple Offer Situations
Often when buying real estate, you’re going to be competing with multiple other buyers, especially in a hot seller's market, so you need to ensure that you put forward your best offer, and that won’t always just be the price you’re willing to pay for the house.
Understanding the top reasons that buyers lose in multiple offer situations will help you put together the best offer possible in the right conditions so that you get the house you want with the least amount of trouble.
5 Reasons Why Buyers Lose In Multiple Offer Situations
Too Many Contingencies On Your Offer
Having contingencies on your offer to buy a house is relatively standard, but if your offer has too many contingencies or the contingencies are too unrealistic or unfair to the seller, your offer may be rejected.
Giving yourself too many outs or loopholes is great for you as it ensures that if anything isn’t perfect for you that you can back out and go find another home to purchase. However, for a seller, if they accept your offer, and then weeks later you pull out, they have to start the process again, which can result in added costs and time lost for them.
Two of the most common contingencies are home inspection and mortgage approval. However, in competitive markets, buyers are starting to waive both of these standard contingency options in an effort to compete and get their offers accepted.
Waiving these contingencies isn’t recommended as it can cause issues and costs for the buyer down the line, and they’re reasonable to still include in offers. However, adding extra contingencies that are out of the norm may get your offer ignored if the seller has multiple other offers.
Your Real Estate Agent May Be Failing You
Most buyers rely on the advice of their real estate agent and for them to put the offer together. However, if your real estate agent is not doing a good job, giving bad advice, or causing additional issues, you may not be putting forward a competitive or reasonable offer.
Make sure that you understand the market you’re buying in and do some of your own research to ensure that your real estate agent is providing sound advice and helping you put together competitive offers with the best chance of being accepted.
Your agent should be reaching out to the seller’s agent to understand the seller’s expectations and what is most important in the offer. You may find that the seller wants a fast closing date, but your offer has an extended closing date based on contingencies.
In addition to submitting a fully completed offer, your agent should be following up with the seller's agent to confirm it has been received and whether there are any issues or adjustments that the seller may want. If you don’t follow up, you may not have a chance to negotiate or make changes to your offer, or at a minimum, you won’t know why your offer was rejected.
You’re Buying Sight Unseen
Buying a home sight unseen isn’t necessarily a problem, but it can cause some concern to the seller. They may believe that once you visit or come to complete the transaction, you may find issues with the home and want to make adjustments or even pull out completely.
To alleviate the seller, you can confirm that the entire transaction will be done electronically, and you will not see the home until after the sale has been finalized or potentially never.
If you will be seeing the home before you complete the transaction, it’s often wise to get the viewing out of the way early and before you’ve submitted your offer. This lets the seller know you won’t find any obvious issues or dislikes with the home that could cause you to pull out.
Your Offer Price Is Too Low Or Too High
The highest offer won’t necessarily get your offer accepted, but an offer too low will likely get it rejected. Understanding the current market conditions and submitting a competitive offer, where the price, contingencies, and other factors all make for an attractive sale to the seller.
Offering an extremely high price for the home, well over the asking price, can raise red flags for the seller, especially if contingencies are in place for the mortgage lender to approve based on an appraisal.
If your appraisal comes back much lower, then you can pull out of the transactions and likely get your deposit back, or it gives you a chance to renegotiate the price. So this type of high offer with an appraisal contingency may get your offer rejected.
You can add an appraisal gap to your offer, which essentially says you agree to buy the house for a certain amount above the appraised value and that it won’t exceed your original offer price. This lets the seller know that you’re willing to buy the price that you’re offering and aren’t trying to game them into a lower price later.
No Proof Of Funds Included With Your Offer
Anyone can make an offer on a home, but without some type of proof that you have the funds available, the seller may be very concerned that you don’t have the funds available, or there may be issues.
With your offer, you should include some type of proof of funds letter from your bank or your mortgage broker, which indicates to the seller that you either have the funds or can get them from a mortgage broker without any issues.
In a competitive market with many offers, anything that you leave out of your offer package can get you rejected, so ensure that everything, including proof of funds, is included to give the seller ease of mind that your offer is genuine.
Final Thoughts On Buyers Losing In Multiple Offer Situations
Whether you’re in a hot seller's market or not, you should always put your best foot forward with your offer, or it may be rejected.
The seller may not believe that you’ll close or that you may try to renegotiate once the process has started, so you should make sure that the seller thinks you will close at a reasonable price and in a reasonable timeframe.