It is hard to imagine that in the midst of a global health crisis, economic uncertainty, and high unemployment we are experiencing bidding wars, but here we are. It certainly supports the old adage that all real estate is local.
In Davidson County, the supply of homes for sale is low, and buyer demand is high creating a competitive environment that in some neighborhoods and at some price points (remember local, local local) has led to multiple offer situations.
Should you find yourself in a hyper competitive negotiation, there are a few options to make your offer more attractive to the seller. Talk to your real estate agent and financial advisor about which of these choices make sense for your individual circumstances.
Include an Escalation Clause
An escalation clause states that the buyer is willing to bid X amount over the list price or the highest offer subject to a cap. A careful review of what comparable homes in the neighborhood have sold for is key to establishing the appropriate cap.
Agree to an Appraisal Gap
Should you pay more than what the neighborhood comps will support, the property may not appraise for that amount. In this case, most buyers withdrawn their bid. Sellers hate this! A buyer willing to cover the gap between the bid price and the appraised value, again subject to a cap, is at a competitive advantage relative to other bids.
However, this means the buyer has to come up with a larger down payment. Talk to your financial advisor/lender before you write a contract which includes this condition.
Buy As Is
No matter how well maintained a property, sellers are always concerned that the buyer will nickel and dime them over the inspection. Offering to take the house “as-is” is one way to allay those concerns. Specifically, this means the buyer won’t ask the seller to make or pay for any repairs, but still retains the right to inspect the property and to terminate the agreement if the inspection uncovers too many or major issues.
Since there is always more work to be done on a house than the inspection reveals, if you choose to buy a property “as-is” maintain ample post-closing funds for repairs and maintenance.
Offer a Rent Back
Maybe the sellers need some flexibility regarding occupancy. If they haven’t found another home or their new construction home is delayed, offer the option to rent back their home at no or minimal cost.
Consider Other Options
Other options include the all cash offer, shorter deadlines, a quick close, or making the earnest money deposit non-refundable after a specific date.
DO NOT write a letter to the seller, which could not only offend the sellers in ways you can never anticipate, but the gesture is rife with the potential for fair housing violations.
Above all, this is a time to keep a cool head. It is easy to get caught up in the frenzy. Do not allow your frustration, especially if you have bid on several homes, cloud your judgement. Know what you are comfortable spending for a home and stick with it.