This is a sellers’ market, and multiple offer situations are quickly becoming the norm.
In certain areas, we are seeing multiple bid situations with six or more bids, and it is becoming more and more common to see offers more than $10,000 over asking price.
If you want to win the property you are bidding on, here are some strategies for success.
1) Arrange a Showing as Soon as it Comes out
The market in Vermont is moving fast, especially Chittenden County.
The median days on market for single families and condos is 19 in Chittenden County.
In some towns or price points, it is even more intense.
13 days in Burlington.
12 days in South Burlington.
9 days in Winooski.
If you break it down further in some places, it can be crazy.
Single family homes in Burlington, for example, between $225K and $275K (a common price point) had a median days on market of just 4 days.
When a property is on the market for 4 days, it often means there was a bid on the property within the first 24 hours of hitting the market.
Throughout the county, the best properties have bids on them within hours.
You can’t always get into a listing the second it hits the market (due to both your schedule and the seller’s showing restrictions), but book your appointment as soon as possible so you have a chance of being updated if more aggressive offers come in.
Also, once you are in, gather all of the information you need to make a decision. Second showings often aren’t possible before placing your bid.
Take pictures of any parts of the house that don’t show up online, and if the measurements aren’t listed online, bring your tape measurer.
You don’t need to assess if every system in the house is working (you will most likely have a structural inspection), but you should do a thorough enough job that you leave knowing that you have the information you need to consider making a bid.
2) Bid Quickly
Unfortunately, there isn’t always an option of sleeping on the decision to make an offer in this market.
Ideally, you can ask your Realtor to put together an offer as soon as you know it is the property you want.
If you already know there are other offers on the table, the timing may need to be even faster.
Any other offer can be accepted at any minute so make sure yours has the chance at least to be viewed!
Even if you are the first offer, being fast has its advantages.
Once the bid is submitted, the listing agent will likely reach out to everyone else who has seen the house (or everyone that has expressed continued interest) and try to drum up more offers.
If your bid comes in sooner rather than later, there will be fewer other buyers out there who have had a chance to see the listing and a lower likelihood that you will end up in a multiple bid situation.
3) Bid Above Asking and Possibly Use an Escalation Clause
These days it is not unusual to see properties selling over asking price (sometimes significantly).
In certain towns, such as Burlington, Winooski, and Williston, the majority of single family homes are selling over asking price.
If you are entering a competitive bid situation, you should strongly consider bidding a minimum of the asking price and in certain situations bid more.
If you are feeling unsure if a higher bid is justified, ask your agent to provide you comps or a CMA (Comparative Market Analysis) so you can better see the market dynamics in the particular neighborhood you are considering.
Lastly, another trick to use in a highly competitive situation is an escalation clause. Basically it is a clause that says you are willing to bid $3,000 (or whatever number) higher than the next best documented bid up to $X dollar amount.
While this approach does show your cards and should not be used in all situations, it is one way to make your offer stand above the competition and can bring your offer to the top of the pile.
4) Consider a Pass/Fail Inspection
In the vast majority of cases, I would advise buyers to always have a professional inspection.
Every house has problems, and it is helpful to catch them before you buy and know what you are getting into.
That said, one way to make your offer more attractive to a seller is to make your inspection pass/fail.
Basically, this means that while you will retain the right to cancel your contract if you don’t like the results of your inspection, you agree not to go back to the seller and nitpick over all the issues that will (inevitably) come up in an inspection report.
Negotiating post-inspection can be brutal on a seller who already had in their mind that they were going to walk away with a certain sales price.
Often sellers feel at peace with the idea that they won’t have to go through a second round of negotiations, and this can in some cases win you an offer that is at the same (or even slightly lower) price as the competition.
5) Make the Closing Date Seller’s Choice
Timing matters a lot for both buyers and sellers so being willing to adjust your timing for a seller can sometimes be the reason one offer is picked over another.
If the property is vacant, most sellers want to close as soon as possible. In other cases, the sellers may be closing on their new home on a certain date and want to tie the closing to that.
Ask your agent to get whatever information they can about the seller’s preferences and accommodate to their preferences, whenever possible.
6) Waive Other Contingencies
A contingency is a provision that allows you to cancel your contract and get your deposit back. Each contingency means risk for a seller.
If you walk away while under contract, they have to start this whole process over again.
Therefore, sellers will almost always prefer offers with the fewest contingencies.
That said, you need to protect yourself so you will want to think carefully about what is essential and what you can live without.
In addition to the structural inspection contingency, if you are financing your property with a mortgage, you will likely want to keep in a financing contingency unless you have access to other funds that could be used to buy the property if for any reason the financing didn’t come through.
You may decide, however, that you don’t need a radon test or that you can forego the fireplace or chimney inspection.
Ask your agent for advice on deciding what contingencies make sense for the particular property at hand and your situation.
7) Put Down a Strong Earnest Money Deposit
In our market, a $3,000 deposit for a single family home or condo is pretty standard unless it is a $500,000+ property in which case $5,000-$10,000 would be recommended (if paying with cash, sellers often want to see even more).
If you want to strengthen your offer, consider strengthening your deposit. A $10,000-$15,000 can really make you stand out.
8) Bridge the Appraisal Gap
Typically, when a property is financed, we also put in an appraisal contingency so that if the property appraises for less than you planned to pay, you can cancel your contract (your lender will only finance you based on the appraised value).
If you have a lot of cash that could potentially bridge the gap between the appraised amount and agreed upon sales price, you may be willing to waive the appraisal contingency which could make your offer more attractive.
9) Write a Letter
Sometimes it is the immaterial things that make the biggest difference.
Homes are emotional. The seller may have lived in their home they are selling for decades and raised their kids there.
If you are planning to buy the house to raise your kids, perhaps consider writing the sellers a letter telling them a bit about you and your family, and why their house is the perfect place for you. You may even want to include a couple of family photos.
It may sound sentimental, but trust me, it often works.
Sellers often want to know that they are passing their home off to someone who will love and appreciate it as much as they did so if you think you might be able to reach them, never underestimate the power of a short note.
ABOUT THE AUTHOR
Pallas Ziporyn is a Realtor based in Burlington, VT. She is the founder and head writer for The Vermont Real Estate Blog, and she works with both buyers and sellers in Chittenden County and surrounding areas.
In addition to her real estate pursuits, Pallas enjoys serving on the Winooski Planning Commission, skiing, writing, and spending time with her husband Chris and their two small children, Leander and Hugo.