In the midst of a rare economic climate affected by the Covid-19 pandemic and the resulting disruptions to supply chains and the housing market, the ratio of sellers to buyers is unbalanced; much to the favor of sellers.
In short, it’s a great time to sell a home.
Two basic types of buyers are out there vying to purchase:
- End-Users. These are the traditional and most typical home buyers, coming from all ages and incomes, be they first-timers, move-ups, or downsizers. Their decision to purchase includes the subjective and sometimes emotional appeal of the property. Their budgets are firm and they’ll normally take a mortgage; making the price they’ll offer subject to an appraisal.
- Investors. Large and small, their purchase decision is more about the potential income or return on the property. The prices they’ll offer can skew toward the asset’s performance over time, rather than what was paid for comparable homes. Since the offer is usually cash, there’s no lender appraisal regulating the price to be paid.
When inventory is as limited as seen in many market areas today, a home entering the market will often attract more than a single prospective buyer. Depending on the price point and rent yields, end-users may be joined by investors submitting offers. As exciting a prospect as it may be to have multiple offers from which to choose, observing some guardrails on this road is well-advised; the most important of which is to consult with your real estate broker; someone who’s seen first-hand the potential risks and rewards, and will make sure all parties are properly and fairly treated.
The most typical options open to the seller receiving multiple offers are these:
- Accept the “best” offer.
- If two or more offers are similarly appealing, invite the buyers to make their “best” offers.
- Choose one of the offers to counter.
Sometimes the “best” offer isn’t necessarily the highest price. What are the pitfalls and red flags to consider?
- Put yourself in the buyers’ shoes to gauge their motivations and patience.
- Remember to “counter” only one offer at a time, or you could find yourself with two buyers for just the one property.
- Look at who’s making the offer and their limitations if the price exceeds appraised market value or if inspections lead to a renegotiation.
- Examine each buyer’s documented proof of funds or loan pre-approvals, and avoid any situations that ask for unusual concessions such as early occupancy.
- Is the financing contingent on unusual circumstances such as a pending inheritance, court settlement, or a suspect foreign transaction? If so, it seems more than reasonable to insist on further documentation, or to at least accept a back-up offer so nothing is lost if the offer is a scam.
It can be hard to predict the behaviors of buyers in these situations, as the process of finding and buying a home can be fraught with emotional highs and lows. Based on fair practices and past experience, the guidance and advice you seek from your listing broker and Moving Station’s Personal Relocation Manager can be your compass to navigating this road.