We don’t really go for the whole “home bidding war” language here at Real Group; it’s just a little too intense and angry for our taste. Instead, we prefer the term “multiple offer situation,” a better phrase that more accurately captures what competition for a listing really looks like in the Chicago market.
Because make no mistake: It can get very competitive. Our team was reminded of that quite recently, when our own Jason Finn listed for sale a popular bungalow-style home in a neighborhood where these classic Chicago properties rarely become available.
We’ll let Jason describe what happened next:
“We knew the competition would be high for the property, and we built that into our pricing strategy - inducing a multiple offer situation. We received 12 offers in 48 hours with varying terms - a range of purchase prices, varying financing terms, two different commonly-used purchase contract formats, and a myriad of additional terms.
In the end, the sellers paid the most attention to two offers - the one with the highest cash-only (no mortgage) offer, and the one from the nice family who wrote a compelling cover letter about their experience in the neighborhood and plans for the home. The other 10 offers didn't have a chance.
In the end, because of the age of the home and concerns about the challenges of the inspection, appraisal, and underwriting, the sellers ended up selecting the cash offer, which was the cleanest. At the same time, they worked hard to give the financed buyers a fighting shot, something that wouldn't have been considered so strongly without the aid of that cover letter.”
In all, this situation offers a few key insights for buyers who find themselves trying to come out on top in a multiple offer scenario. Here’s what you can take away in order to “win” that competitive sale:
Make Your Offer Stand Out
Most of us will never be able to purchase a home with cash in hand, like the eventual buyer in Jason’s situation above. But it’s important to realize that there are still several little things you can do to really make your offer stand head and shoulders above the crowd.
For one thing, you can do what the family did and personalize your offer. You’d be surprised how far you can get with a cover letter or message explaining who you are and why you would be the best fit for the property. If you’re able to connect emotionally with the home’s seller, you’ll make yourself more memorable and, in the end, perhaps harder to say “no” to.
Make Your Offer More Financially Competitive
With that being said, it is still a universal truth that money talks, and that, more often than not, the buck stops with… the buck. There are a few ways that you can goose up your offer, so to speak, to make sure that it gets noticed.
First and foremost, you’ll want to make sure that your offer is sufficiently competitive with other buyers’. In order to even get your foot in the door, you’ll want to be ready with a pre-approval for a mortgage, which helps communicate to the seller that you’re able and ready to buy quickly, without too many strings attached to the process.
If competition for a home is really hot, you may also want to consider including what’s known as an “escalation clause” in your offer. As you may be able to infer from its name, an escalation clause is essentially an acknowledgement that you, the buyer, will increase your offer (within pre-determined limits) if the seller receives a higher bid.
Need an example? Say Buyer Lucy offers $150,000 for a Chicago home. Working with her real estate agent, Lucy can add an escalation cause that, if there is a higher competing offer, Buyer Lucy’s offer will increase in an increment of $2,000 above the competing offer. However, Lucy will set a cap such that the offer will not exceed $165,000.
If no other offers are submitted, Lucy’s offer remains at $150,000. If another offer comes in at, say, $155,000, Buyer Lucy’s offer increases to $157,000. If another offer comes in at $166,000, Buyer Lucy’s maximum will be eclipsed and so the other offer will likely win the day.
Find Out the Sellers' Priorities
It is shocking to us how infrequently the buyer's agent, or the buyers themselves, ask what the sellers are looking for. Yes, it's true, they are almost always looking for the highest sale price, but what else is important to them? Can you offer them a quicker closing timeline? That might offer a lot of value - both monetarily (they could save a mortgage payment, insurance, and property taxes for that duration) and non-monetarily (peace of mind.) How about a large earnest money deposit? Are there other benefits you can throw into the mix? Be creative!
Make Sure You Have Representation
One of the most important things you can do as a buyer is to bring on real estate professional to assist you in not only finding a home, but in navigating the many twists and turns it may take to get from there to the closing table.
With an agent by your side, you’ll be better equipped to make the best offer possible; in addition to understanding things like escalation clauses, your agent will be able to help you present a competitive but realistic sum when you make your offer. A real estate agent should come to you with a thorough understanding of the market conditions for your target area, and apply their first-hand knowledge, connections, and negotiation skills to get you the best price possible – even in a competitive situation!
Here at Real Group, for instance, we pride ourselves on consistently beating the market - negotiating our clients' purchases at a better discount off of list price than other agents in our locale.
What’s more, your agent will also be able to help you with all of the other nitty gritty elements that come with buying a home, including understanding the paperwork, setting a timeline, and putting you in contact with other professionals, including contractors, real estate attorneys, and insurance professionals.
Have any more questions about buying or selling in Chicagoland? Our team is here and ready to help! Drop us a line today to get the conversation started.
