Don't rule out a house because of competition

STARTING OUT

June 26, 1994|By Dian Hymer

Is it wise to make an offer in competition?

Buyers often shy away from making an offer on a property if there are rival offers from other buyers. Understandably, you'd rather buy without competition. But you shouldn't rule out a house just because there's healthy interest in the property. A house that's in demand will probably be a good investment.

The first thing to do when you decide you want to make an offer to purchase a property is to let the seller or seller's agent know. Ask to be kept informed if any other offers are being made.

Ideally, multiple offers should be presented sequentially to the sellers. Each offer should be heard in private.

A listing agent who writes an offer for one of the buyers should enlist the help of another agent, perhaps the office broker/manager, to represent the seller during the multiple offer presentation. This way the buyer working with the listing agent won't have an unfair advantage over the other buyers. This can have disastrous consequences if one or more of the losing buyers suspects foul play and seeks a legal remedy.

It's rare that an offer is accepted exactly as it's written, so even in a multiple-offer situation you can expect to see counteroffers. If there's one offer that's far superior to the others, the sellers will probably counter that offer first. They may also counter the remaining offers for backup positions.

Sometimes none of the offers are acceptable to the sellers. Then the sellers either counter as in the above example or they may counter all the offers for primary position. With this approach, the first buyer to meet the sellers' terms gets the house. Since the sellers only have one house to sell, and there is more than one buyer, the counteroffers will usually state that acceptance of the counteroffer is subject to the seller's written approval or receipt. This way the sellers can avoid selling their house to more than one buyer.

Even though you'd rather be countered for primary position, it may be worthwhile to accept a counter for backup position. If buyer No. 1 suffers severe remorse and backs out, the house would go to the first backup buyer.

FIRST-TIME TIP: First-time buyers often find themselves in multiple-offer competition because there's usually a high demand for housing at the entry level. Keep in mind that there's more to an offer than the price. Sometimes the highest price in a multiple offer is not the winning bid. A well-qualified buyer can be the successful bidder against buyers who offer to pay more but who are only marginally qualified. To give yourself a competitive edge, get pre-approved for the loan you'll need to complete the purchase.

THE CLOSING: The biggest risk you take in a multiple offer competition is disappointment. Some buyers fear they'll pay too much if they get involved in a bidding war. To protect from this, include a provision in your purchase contract that says that the contract is subject to the property appraising for the purchase price.

Dian Hymer's column is syndicated through Inman News Features. Send questions and comments care of Inman News Features, 5335 College Avenue, No. 25, Oakland, Calif. 94618.

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