Buyer tips on dealing with multiple offers, part II

This article is reprinted from Wine Country Real Estate, a special advertising section of The Press Democrat.

Buyers are in a 'beauty pageant' every time they make an offer on a home. Your Realtor's goal? You clutching a big bouquet, adorned with a tiara and doing that 'wave' while clutching your accepted offer! So how do buyers win the pageant? Before we get to that, let's revisit the current marketplace.

In the summer of 2010, one month had 2200 homes for sale. In summer of 2013? A tad under 700 homes. Today? Early spring of 2015 shows a meager 600 homes for sale. The scarcity of product plus low interest rates plus demand creates a 'Seller's Market.' We are now in 'Multiple Offer Land.' Your offer to a seller may result in one of three things: acceptance, multiple Counter offers to all or select offers, or perhaps just a shotgun 'highest and best' counter offer.

Multiple counter offers can be responded to in many ways. 'Highest and Best' (H&B) came into our Realtor vocabulary when banks were selling their foreclosed home inventory. This simply meant multiple counter offers went out with just these words, 'Submit your highest and best offer.' In other words, time to 'put up or shut up.' Why do sellers choose this strategy? To garner more money but also to give buyers time to sharpen the facets of your offer.

The following techniques can also be used when presenting your offer initially. Keep in mind a buyer does not have to offer more money in an 'H&B' scenario. If you feel your offering price is solid then think about the following: Increasing your deposit; shorten or eliminate timelines/inspections (be very careful giving away your due diligence periods); shorten escrow; more cash down if you have it; and if you have more cash, then stating in your response, 'Should appraisal be less than required for loan approval, buyers will make up the difference in cash.' Let's explore these options advantages and pitfalls.

Sellers love and adore big, fat juicy deposits. Realtors like 3% of the agreed upon purchase price as a total deposit. The California Association of Realtors (CAR) has 3% of the agreed upon purchase price designated as 'liquidated damages' for contract default. (Buyer Alert! Check with your attorney as to the 'Liquidated Damages' clause of the CAR purchase contract in regards to your deposits). This 3% can include an initial deposit and an increase once all 'contingencies to the offer' have been removed. $500,000 purchase price deposit total is $15,000. If you have the cash and a big down payment consider an eye-popping deposit. $50,000? How much is enough? Your Realtor can advise you. Sellers want to work with serious buyers!

This next technique is controversial. Realtors want a buyer to be fully aware of the condition of a property they are purchasing. So the idea of shortening inspection time frames or foregoing them altogether can be fraught with peril; no one wants to buy a pig in a poke. Sellers love clean offers with little if any contingencies. Realtors at the very least want buyers to have a pest inspection and contractor's home inspection report. If the listing agent had these reports done previous to placing the house on the market, think of using these reports to determine the overall condition of the property.

As a buyer you want the pest report to have a certification that the house is free of any 'active infestation or dry-rot.' A Home Inspector's report provides details and depth as to the overall condition of the home's components and some have a 'summary' section of work needed on the Home. You should have a contractor read over both reports. Let these reports guide your offer. Your level of sophistication as a buyer will dictate your level of confidence in using this technique. If you're not comfortable with this technique then order new reports. Keep your physical inspections as part of the offer. But if you are satisfied with the existing reports then consider waiving your physical inspections as a part of the offer. An offer with no physical inspections impresses the seller and makes the listing Realtor smile.