Case Study: Winning the deal in a multiple offer negotiation
Meghan and Mark, newly minted parents of a darling baby boy and an energetic doggie, outgrew their condo and were excited to find a single-family home for their growing family. After interviewing a few agents, they gave me the best news: we would work together to find their dream home in Chicago! Meghan and Mark had realistic expectations for a 3+ bedroom home in their price range. Other important factors were a decent kitchen (they love to cook), a nice backyard, and walkability to a few shops, restaurants, and a local ‘Cheers’ Bar. I set up a Collection, and we found quite a few homes to see on our first outing. Then, the challenges began.
Challenges
Inventory: We quickly discovered that Meghan and Mark were just a few buyers looking at all the wonderful inventory. And, the homes, at least the good homes priced well, were selling as quickly as they came on the market.
Multiple Offers: We quickly found the ‘one’ and were told at least six offers would be coming in before we started writing the offer. Also, the offer instructions had a long list of restrictions and unusual requirements. So, we bowed out. Two weeks later, we found a fantastic home and wrote up our offer immediately, knowing at least four offers were coming in, so we came in strong but not strong enough. The next day, we received this note from the listing agent: “Hi Deb, My sellers really liked your buyers, but they went with another offer. We wish them the best!” No context on why another offer was accepted. Five multiple offers later and crickets.
Time Constraints: When we started in early June, we had plenty of time to get to know the market, but now we were coming into a time crunch, with a lease ending July 31. I suggested that my clients approach their landlord with a request to extend their lease by 30 or 60 days. A Sept or Oct 1 lease start date aligns with Chicago’s fall rental season. The landlord agreed and generously offered to extend on a month-to-month basis, giving Meghan and Mark plenty of time to find a home and close…well, we hoped 30 to 60 days would be enough time.
Financing: Meghan and Mark were extremely well qualified, buying at a price range far less than they were qualified to spend, with A+ credit and a substantial downpayment. However, we were outranked in each offer by at least one buyer who waived financing and inspection.
Strategic Solutions
The Financing Contingency: Before looking at the first house, I introduced Meghan and Mark to Steve Pallotto, our preferred lender of 30+ years. Steve provided us with a Power Bid Approval, a robust approval that allows the mortgage contingency period to run at 14 days instead of 30-45 days. When it became clear we needed a more effective strategy to overcome the financing contingency, Steve discussed with our clients the pros and risks of waiving their mortgage contingency. I also advised my clients of the risks inherent in waiving financing when you do not have the liquidity to close without a mortgage…that risk is losing, in our case, $50 to $70K of earnest money. After heart-to-heart discussions with our lender and attorney, we decided to move forward on the next offer without a mortgage contingency.
The Inspection Contingency: Forty years of experience as a broker and having bought and sold many properties taught me the importance of an inspection unless you are buying land or a place you intend to gut renovate. Even the most seasoned professionals—inspectors, contractors, and agents—can miss something that could make for an unexpected and expensive fix. So, how do we satisfy our goal to protect our clients’ best interests while messaging the seller that we will not use the inspection to renegotiate deal terms or terminate the contract? The solution was to include an ‘as-is’ addendum in our offer with the right to conduct an inspection. In this addendum, we stipulated that we would not come back to the seller unless the costs to repair material or structural issues were in excess of $7000.
Outcome
Successful Loan Approval: Thanks to our preferred lender’s quick action and advocacy and our client’s strong financials, the clear to close came in prior to the conclusion of attorney review.
Successful Inspection: Meghan and Mark worked with an excellent home inspection team. They conducted a thorough of the home, highlighting the minor maintenance issues that we expect to find in a home of 20+ years, and also noted the excellent condition of the home.
A Timely Closing: The closing was scheduled for September 16, which was preferred by both the seller and Meghan and Mark. The seller moves when they wish and our clients have two weeks to move and no additional rent payments.
