There has been a certain shift in the market. There is more inventory and sellers are having to be a bit more aggressive in their pricing if they want their home to sell quickly. Actually, so reasonably that homes are receiving multiple offers. The home sells quickly because the agent either prices the property below market value or it is an amazing property that everyone wants, or both. There are also some properties that have been active for a while with no interest and then all of a sudden – bam – several offers at once. Of course, listing agents love this. They look good in the eyes of the seller. However, it’s a buyers’ agents’ nightmare. What could have been a nice and easy transaction and negotiation, potentially turns into a battle and a guessing game.
A buyer will most likely offer over the amount that they are comfortable paying because there is one or more other offers. There is now less control over the deal. Also, the selling agent plays a big role in this. Is he/she a new agent? Do they have experience in multiple offers? Can they navigate the process well and fairly? Does that agent give more information to one agent vs. the others?
There is one helpful document when dealing with a multiple offer situation. An Escalation Clause is a document that is often used in the negotiation process. This document basically says that you will beat the highest competing offer by X dollars up to Y dollars with verifiable proof of that offer. Agents will conceal the name of the agent/buyer of the other offer who we are in competition with when presenting that to buyer agent #2. Keep in mind, nobody knows who made what offer or if there is another escalation clause out there. It’s a little like gambling. You are hedging your bet. However, you are also getting insurance that your offer won’t be beat up to a certain dollar amount. A second chance! It is a great strategy to use. A buyer typically only loses if your escalation clause maximum dollar amount goes up to a lower number compared to the other buyer. Some agents do not use an Escalation Clause and most likely lose the deal over it. The downside is that it does show your hand a bit. It shows the seller that you are willing to pay more and what your top dollar is but, it gives you another chance at the deal.
Depending on the situation, it is a great strategy. However, not to be used on every deal. Other methods that you can use to win the deal is an all cash offer, a high amount of earnest money and taking the home “as is” with no seller credits or repairs. I would never recommend to purchase a home “as is” unless doing a full gut job or it’s a small condo and you know that work has been done already and to the building. I still highly recommend an inspection if someone does decide to take a home “as is.”
As you can see, there are numerous strategies that a buyer’s agent can use to get someone the home of their dreams. It is risky to represent yourself, as you do not have all of the tools that a licensed agent has like: determining comps and price, present clauses, knowledge of good and proven inspectors or attorneys and more.
Again, I strongly recommend being represented by an experienced buyer’s agent to help navigate these sometimes stormy waters.
Keep in mind that the seller pays the buyer agent commission. It is free help and advice of a trusted professional alongside you all of the way, from start to finish. By the way, I know a great agent