Competing Against Multiple Offers
Tim Ford | Thursday Oct. 1st, 2020
As Bozeman’s Real Estate market continues its strength moving into fall, we’re seeing more and more multiple offer situations. If there’s only one house but 10 buyers, 9 aren’t going to get the house. Many buyers focus solely on price, which is often the major deciding factor. However, if multiple offers have a similar price, there are other factors for sellers to consider. In order to be the successful bidder, buyers should closely analyze all the terms of their offer.
If a buyer is planning on getting financing, they should ask themselves if they really need a financing contingency. How confident are they that they can get their financing? Are they willing to risk some earnest money if they can’t? In the Bozeman area, a lot of offers are written with a financing contingency that runs right through closing, meaning if a buyer can’t get their financing on the day before closing, they could potentially terminate the contract and get their earnest money back. That is a lot of risk for a seller to take. A buyer could consider a shorter financing contingency or decide if they feel confident enough to forgo it all together.
The appraisal contingency is similar. I’ve seen more than one offer chosen because of the way the appraisal contingency is written. Let’s assume a property is listed for $500,000 and is attracting multiple offers. If a buyer puts in an offer for $525,000, they might consider writing their offer so that the property needs to appraise for at least $500,000. In this situation, they would need enough cash to cover the gap in the event the property appraised for less than purchase price. Or consider taking all the risk and forgoing the appraisal contingency all together. Depending upon a home’s uniqueness and the availability of similar comparable sales, a buyer or buyer’s agent could come up with an approximation of where that appraisal might fall. When prices are appreciating rapidly, the appraisal is a big concern for sellers and getting creative with the appraisal contingency can be a great way to win them over.
The inspection contingency is also a big one. I personally have won multiple offer scenarios by skipping the inspection contingency. However, it is a big risk. If a buyer isn’t comfortable skipping it all together, consider keeping it very short or offering some language that the buyer intends to purchase the home as is but will get an inspection for informative purposes.
The closing date can be important as well. Try to get as much information about what the seller’s plans are in order to be accommodating. Have they found a replacement property, what time frame do they need for moving out, would a rent back for a few weeks or months be advantageous?
Lastly, when looking at price, consider using the opposite psychology of pricing to sell. When we price to sell, we price things at $199 rather than $200. When making an offer, consider making that offer at $201, rather than $199.
As usual, I have included the latest Real Estate statistics. The Real Estate market has stayed busy through the summer as prices have continued upwards. 738 homes have sold in Bozeman since the first of the year through September 1st, outpacing last year’s 690 sales. In addition to these closed transactions, another 199 home sales are currently pending or under contract, which compares to 150 home sales pending this time last year.
The included data reflects sales of homes in the greater Bozeman area, including Four Corners, Gallatin Gateway, Bridger Canyon, and Bozeman city limits. The data includes home sales reported through the local Big Sky Country MLS, and does not include private party sales, Condominiums, or Townhouses.