41% of agents say cash offers are the most effective strategy in a multiple offer situation, but don’t underestimate the power of pizza.
The things some buyers will do to win a home in a multiple offer situation is crazy, and many times downright risky, such as waiving contingencies, offering 30% over listings… the list goes on. Real estate agents throughout the past six months submitted nearly four offers per client on average before one was accepted, with 13% saying it took on average six or more.
The good news is home shoppers are still finding homes to buy, despite intense competition and multiple offers, with the help of their real estate agents. A new survey by Zillow breaks down the strategies that are working in today’s market to score a home – and what buyers should be prepared for.
Sweetening the offer
Agents are using a variety of tactics to help their clients’ offers stand out. At least half of listing agents surveyed encountered an all cash offer, an escalation clause, submission before the offer review date, a higher down payment or more earnest money when reviewing offers.
Out of these strategies, one of the most effective to win a deal is an all-cash offer. About four in five agents (77%) sometimes submitted all-cash offers on behalf of their clients, and 41% of listing agents said an all-cash offer was the most effective strategy in their recent transactions, especially when multiple offers are submitted.
However, cash offers are not feasible for most buyers in the market, and agents use an assortment of strategies to win offers. About 21% of buyers’ agents offered a higher down payment or more earnest money to get their client’s offer to stand out, and about one-quarter always submitted before the review date. More unconventional strategies that agents are using include offering leaseback, throwing a pizza party, and sending flowers to the sellers.
The role of real estate technology
With the market moving so fast, the best and easiest way to get a speed advantage is to get tech savvy. Agents say 31% of clients always or usually tour a home virtually before visiting in person.
“Being able to tour a home virtually is a big timesaver for buyers,” says Josephine Sabatino, broker manager at RE/MAX Edge in New York City. “3D tours provide buyers a clear, detailed view of the home and they can decide if it’s right for them. This saves buyers from going to see a bunch of homes that just don’t work, and help narrow down their choices early.”
Risky offer strategies
Waiving contingencies is common in an ultra-competitive market, and can be frustrating to home shoppers who lose bids to buyers using this strategy. In their last three to five transactions, at least half of the listing agents surveyed encountered waived inspections or financing in multiple offer situations. However, waiving contingencies can pose a huge risk to buyers in the short and long run.
- Waiving an inspection puts buyers at risk of unknown structural, mechanical or safety defects which can be incredibly costly to the buyer.
- If a buyer waives financing and their loan is not approved or the home doesn’t appraise at the offer price, it’s the buyer’s responsibility to make up the difference in cash or walk away from their earnest money deposit – both potentially costly consequences.
- So-called “love letters,” intended to tug on a seller’s heartstrings, can put buyers and agents at risk of fair housing violations. These letters can include personal demographic information about the buyer, unlawfully swaying a seller’s decision, which can violate the Fair Housing Act. This is also not a successful strategy for buyers — according to the agents surveyed, love letters are the least important factor for sellers in the current market.
Agents are the key to winning the deal
The residential real estate market is not expected to slow down anytime soon, and that is why it’s imperative for buyers to find a knowledgeable and trusted agent to guide them through the stressful and daunting process of purchasing a home.
Sabatino’s overall advice for today’s buyers? “Buyers need to remember the why and the priorities that have to come first. Don’t worry about the set up that is already in the house. Bring in a friend with vision, and you could end up utilizing spaces for things you never thought possible!”