Common Mistakes Buyers Make in Multiple-Offer Situations
1. Not having your agent do a full comparative market analysis of the property: a clear-headed assessment of what fair market value is.
2. Not making a list of the strengths and weaknesses of the property, to keep in mind during the negotiations or perhaps to even use in the negotiations.
3. The flip side of #1 & #2: Getting too excited and making a purely emotional decision. When buyers see that other buyers want the property, the “value” of the property soars in their mind, which is why the highest prices always result from either multiple bidding or the fear that others will be making offers. A good listing agent does everything he or she can do to manipulate this fear. This is the flip side of why values decline after longer days on market: If someone else wants it, it’s very valuable; if no one else wants it, there must be something wrong with it and it can’t be so valuable.
4. Not setting your walk-away price before getting starting with the negotiating. At some price point, the deal is no longer worth doing, no matter how great the property.
5. In one’s urgency to make the deal, not including sufficient contingencies to perform thorough due diligence. I’ve seen homes that look perfect turn out to have $250,000 in pest damage; if one wrote the offer without the appropriate inspection and investigation contingencies, one might win the deal, but wake up to a house with very unpleasant surprises waiting.
6. Having an agent that is more interested in making the deal (and collecting their commission) than making you the best deal; having an agent who doesn’t know the market values in the area; having an agent who doesn’t know how to negotiate (sadly common).
7. Not learning as much as possible about the seller, the property and the listing agent as possible: needs, wants, circumstances, style of doing business
8. Not making sure that there really are competitive offers, because sometimes the listing agent will blow smoke about “expecting multiple offers.” You can even have your agent write two (or more) offers at different price points, with clear instructions as to which one to submit depending on the final number of offers received by the listing agent.
9. Throwing in the towel when told that the seller is only countering another offer(s). If you want the property and you’re willing to pay more, one can always throw in another offer during the seller’s counter offer process with others.
10. Not asking for back-up position if you lose in the bidding. Sellers will often put a second buyer into back-up position at the same price or even a lesser price than the accepted offer. If the first deal blows up, then the back-up offer is immediately elevated into accepted position. Deals blow up all the time (probably about 10% – 15% of the time) for a wide number of reasons and one can find one is buying the house they wanted at an acceptable price after all. (Buyers in back-up typically have the option to cancel that position at any time, so they can continue to look for another home. It really is a no-lose proposition.)