Multiple Offer Situations Podcast
An episode of the Northern Colorado Real Estate Ramp Up podcast by Ryan Jenkins
What to expect and how to succeed in multiple offer situations in the Northern Colorado Real estate market.
The following text is a transcript of the podcast…
Hello friends. Thanks for tuning in to this episode of the northern Colorado Real Estate Ramp Up podcast. This is Ryan Jenkins. Thanks so much for listening. We really appreciate you and we’re starting to hear some clients refer to the podcast during the process of buying or selling, which is super fun and makes me want to continue to do these! And, so we’re glad that you’re listening and we hope that you continue to get some value out of these podcasts. Today we’re going to talk about multiple offer situations and all that that entails. It’s really the hardest part of my job, both on the buying and the selling side, particularly on the buying side. I’ve been selling real estate for about 15, 16 years. For the last six years, we have been in a pretty hot seller’s market. But before that, it was a buyer’s market. So, the first part of my career it was pretty easy to work with buyers. You could take them out and tour 20 different homes over the course of the weekend. And, pick the one you want and make an offer well below list price and the seller was really happy to have an offer of any kind. And, that ended in about 2013. We started to look around and say, wow, there’s not as many properties on the market and our buyers are running into situations where more than one person is offering on the same property. And, then in 2013, 2014 it started to get worse and worse. Here we are in 2019 and competitive offers situations are the norm instead of the exception.
So, that has really changed the way that we operate and we have to give our buyers a crash course on what to expect when they come to Northern Colorado. That’s what this podcast is basically going to be: the crash course that I give clients when we first sit down and tell them what to expect. It’s particularly hard for clients to come from the middle of the country, the midwest, and Texas and a lot of those markets are not experiencing the same type of market conditions that we’re experiencing here. When you have people that come from the west coast and the east coast, they seem to be a little bit more receptive and understanding of a competitive market because they have experienced it before. Obviously, people from California have experienced it and the northwest has been very competitive for a long time. Especially my clients coming from the Midwest, you really have to sit them down and say, look, this is what you’re going to encounter at different price ranges. Obviously, when you start to get above 500,000, the market softens a little bit, but you can still get in competitive situations in those higher price ranges. A couple of weeks ago I had a multiple offer situation on a $550,000 house and there were a four offers and a couple of them were cash and it was very competitive. But, when you start to get into the five, six sevens and then obviously on up from there, the market softens considerably. There are fewer buyers that can afford to buy or are looking in those price ranges and you have less competition. And, there will be times when you’ll be the only one offering on a property and you may be able to pay less than list price. But, most of our clients are paying in the three, four, $500,000 price ranges. And, in 2018, the last time we pulled these numbers, about 60% of properties were selling at or over list price. So, you can asses that more than half of the properties that hit the MLS were in a competitive offer situation where they were receiving more than one offer at the same time. And, so we were dealing with this regularly, more than half the time we offered on a property. We are not the only ones to do that. And we had to structure our offer in such a way where we would hopefully win. And, so that’s what we’re going to talk about today.
A lot of times, when we start to talk about this, they will say to me, “we don’t want to get into a bidding war” and I want to kind of define what bidding war is, so we’re all on the same page. A bidding war, think of a bidding war like an auction-style bidding situation where you’re asking everybody to make an offer and then you repeatedly go back to everybody and ask if that’s the best and final offer…to me that is a bidding war. Or, think of it like an auction-style bidding war. And, I think a lot of folks think that is going to happen in a multiple offer situation. But, the reality is that essentially what happens is the seller’s agent will notify everybody and say, “we have received multiple offers on this property and we need you to submit your best and highest with the best terms and the highest price that you’re willing to pay. And then we will pick one to choose.” People will pick a single offer to work with. So, you get kind of one chance to make your best offer. You don’t have a situation where the seller is going to come back and they’re going to solicit offers and then go back to everybody and say, is this your best? Is this your best? Can you do any better? And try to like gin up everybody to continually offer more and more money in. And really it’s just not customary to do that because it drives everybody crazy and they never know when the auction is going to be shut off and how many times they’re going to be asked to rebid. So, it’s customary to just say, “give us your best and final offer and we’ll pick one to work with.” You might have a listing agent, or what we call the seller’s agent, might come back and say, “we want to tweak this one thing about your offer.” Or, they might come back and say, “you’re not the highest offer but you’re a cash offer. We want to work with you.” Every once in a while you’ll get those kinds of opportunities. But, the vast majority of the time, if you didn’t make the highest offer with the best terms on the first initial offering, you will not get a chance to resubmit or change your offer. They will just take another one. And, so we have to put our best foot forward in these situations and most of the time we don’t know what the other parties are offering.
Sometimes, I can get a little bit of a hint from the selling agent. I always ask can you tell me about the other offers? Are any of the other offers cash? Are they waiving any of their contingencies? We’ll talk a lot more about that in a second. We try to get as much information as we possibly can. Most agents will not tell you much. They will tell you how many offers there are typically, not always, but most of the time, just as a courtesy, they’ll say this is how many offers we have. Sometimes they’ll tell you if any of the offers are cash offers, but that is about the most information that you are going to get. And, so you have to operate on a limited amount of information. And, that is frustrating because obviously you don’t want to pay a lot more than you have to-if somebody else is paying $5,000 over list price, you don’t want to pay $10,000, you want to pay $6,000, you want to pay just a little bit more than they’re paying. And, so a lot of times we’ll do what we call an escalation clause, which is a clause that essentially says we will beat competing offers by $1,000 or $2,000, up to a certain point so we’ll beat a competing offer by $1,000 up to this price. And, at that price our escalating offers stops and that ensures that you’re not paying drastically 5,000 or $10,000 higher than somebody else, and so we use escalating clauses quite a bit. There are times when a listing agent will tell you that you may not use an escalation clause and that’s fairly rare, but there are some agents that are starting to do that. Escalation clauses are great. The only problem is sometimes the seller can perceive that it’s unfair if one party offers a higher price initially than another party but they don’t escalate as high, sometimes a seller can say, well, that’s not fair-“this guy was kind of willing to put on paper that he would pay $505 and you put on paper that you were willing to pay $500, but the guy that was willing to pay $500 escalated higher than the other guy. Sometimes I’ve seen sellers perceive that as like an unfair situation. So there are times when people don’t use escalating clauses and they just are willing to offer a static dollar amount and say, this is my best offer. And, certainly that is the strongest offer, the strongest way to go. But, of course, you run the risk of significantly overpaying. But it does show strength.
I do want to just kind of jump in here real quick with a great tip. When our clients are getting loans or getting pre-approval letters for mortgages and we’re in the early stages of this process, we encourage them to get a lender letter that is for the highest amount they can qualify for. Traditionally people would get lender letters that said Mike and Suzanne are qualified up to this amount and that amount would be reflective of the price range that they were shopping in. Or a lot of times you would get a letter that matches perfectly what the list price for the property was that you’re offering on. But we’re not doing that anymore. Actually, in almost every case I’m just asking my clients, “please ask your lender to max out your approval amount.” So if you’re buying a $300,000 house but you could afford to buy a $450,000 house, let’s get that letter for $450,000 because the name of the game in situations is to show strength in every way possible. Bigger down payments are going to be more attractive for a seller than a small down payment. And a higher pre-approval letter of course is going to be attractive. There are times when buyers are kind of squeaking by on that loan to value ratio and then they’re kind of just barely qualifying. And, there’s the possibility that maybe the lender overlooked something. Maybe they had a child support payment that didn’t show up or they bought a new car after they got their pre-approval letter and it throws off their, their debt to income ratio. And, so they potentially could not qualify. But, if you have a letter that is $50,000 or a $100,000 or $200,000 higher than the price range that you’re shopping in. And, actually a lot of buyers are in that situation where they’re kind of shopping well below what they can afford to pay. Then we can show that strength. And if you can show that strength, you can show that they qualify easily, then you can be as attractive as, as a cash offer really. And, in a lot of situations, the folks that have cash, I mean, people always say that cash is king, but a lot of times people with cash kind of think that they’re hot stuff. And so they may not offer as much or they may not be willing to to sweeten their offer in such a way. We’ve seen many, many times where people that are getting a mortgage can beat people that have cash just because folks that have cash or not quite as aggressive with their offer.
We talked a little bit about folks coming from the Midwest. Sorry to pick on you, midwesterners! I’m a midwesterner myself, born and raised in Saint Louis, Missouri. And I think Fort Collins, northern Colorado, is pretty attractive for midwesterners for whatever reason. There seem to be a lot of us out here. What I’m trying to say is that a lot of midwesterners come out here and I tell them about the competitive market and what it’s gonna take to get a house under contract. And they believe me, but to a certain extent, they don’t at the same time. They’re like, “okay, I understand. Okay, it’s competitive. But, then we’ll go and start shopping for homes. And, when it comes right down to it, they are still saying, “I’m really not sure I want to get into a bidding war. And, we are not really used to paying over list price where we’re from.” I understand that and we will offer whatever you to offer. I never tell my clients, “oh, you shouldn’t make that offer. It’s not worth it.” I mean, we will make whatever offer you want to make, but in a lot of those situations where they’re coming from kind of a different market paradigm, they may lose two or three or five or six offers before they realize how aggressive they need to be in order to win. And, a lot of times, you can tell people how it is, but you certainly are not going to push them, people aren’t going to do what they don’t want to do. So, you might say, okay, I think it’s going to take $12,000 over list price to win this property. You can tell them that, but actually doing that as another thing. It’s kind of like they have to see it for themselves before they really believe you. They might have to lose a couple of competitive offers situations before they are like, “okay, I think I understand what we’re going to have to do to get a house under contract, how aggressive we’re going to have to be.” So, just kind of prepare yourself for that and we’ll coach you through each one. We’ll walk you through exactly what we think you need to offer. We’ll tell you all the parameters of the situation and you can decide how aggressive you want to be in each case. We will never push you to do anything you don’t want to do. We’ll give you advice and you decide what to do yourself. But, especially in the three and $400,000 space, when you have a house that’s getting three, four, five or six offers, it has become the norm that a couple things are happening…
The first thing is that buyers are escalating their offers well over list price. The average over list price sale in Fort Collins is about 3% over list price. So, for a $400,000 house, people are paying $12,000. It’s common for it to be more than that, $15, $16, $17,000 over list is certainly not unheard of, but most of the time it’s in that $12 to $16,000 range. And you might notice that I’m saying odd numbers. And the reason that is is because agents have become accustomed to not landing on even numbers when they are making offers or making escalation clauses. Because a lot of times somebody else offers $510 like you want offer five $511 or whatever the price may be. And so, we always try to if you’re going to offer 15,000 over list for like, well maybe we should offer 16 just to give us that extra little buffer because maybe a lot of other people are falling on a round number. So it sounds crazy and it sounds paranoid and, and is, but, if you’ve been through hundreds of these situations like we have, you got to kind of pull out all the stops and you’ve got to do things that you don’t want to do: you have to pay more than you want to pay. A lot of times you have to pay more than the comparable sales tell you you should pay. And I know some people are thinking, “this guy is insane. I would never play in this market. There’s a bubble that’s gonna burst and yada yada. And that’s fine, you can certainly have that opinion, but the bottom line is that our market has been appreciating, from 2015 through 2017, we were seeing double digit appreciation, appreciation as much as 15% per year. And so, when you look at comparable sales from six months ago those properties could be 6, 7, 8% below what somebody is willing to pay now. And so, when we’re offering on a property and we’re looking at comparable sales, you might say, “man, these comparable sales are quite a bit less than these people are offering right now. And, you’re telling me I’ve got to pay over list price?”
But the bottom line is that the market is appreciating at such a rate and there’s such a lack of inventory that, yeah, you may be looking at a property from six months or a year ago and it may be that people might be willing to pay 30, 40, $50,000 more than you’re paying now. And if that seems crazy to you, I understand, but that is the nature of what we’re dealing with in this market today. And, we do have another podcast episode about whether the market is in a bubble right now and you can certainly go and listen to that. There’s a lot of great information. That’s a question that we field from clients all the time. And, you can listen to the podcast and make up your own mind, but it’s our opinion that the market is not going to crash, that the market is going to stabilize and make smaller appreciation gains than it has in the past. But, we just don’t see the same conditions that we saw in 2008. We don’t see that the market is going to crash. We see a huge amount of people moving to Colorado.
Our property taxes are very low. The cost of new construction is very high. And, if our market is going to correct, we just don’t see that happening in the immediate future. I mean, it may correct at some point, obviously it will correct at some point, but we don’t think that’s going to happen in the immediate future. And, we do think we’re going to see more of a moderation of appreciation. So, little tangent there because I feel like I have to qualify that as I’m talking about all this multiple offer craziness. I feel like people’s mind immediately goes to the bubble word. So, I feel like I have to just jump in here and address that real quick.
All right, we’re going to go back to multiple offers. So, let’s say that you are offering on a $350,000 house and I’m your realtor and I’m telling you that it’s a multiple offer situation. There’s a number of other people that are offering and I tell you that there’s four other offers and let’s say two of them are cash, and so we will be the fifth offer. You can pretty much guarantee in a situation like that, that the other offers, obviously the cash offers, are probably not going to have an appraisal contingency, but it has become very, very common for other folks to waive their appraisal contingency in a multiple offer situation. So essentially what they’re going to say is, “we’re offering you $365, in the event that the property appraises for less than $365, we will proceed with purchasing the property at $365 and we will not ask you to drop the price.” So, obviously the clauses are written a little differently than that, but that’s essentially what people are saying that they are willing to do in the contract. Sometimes they’ll put a dollar amount on it. They’ll say, “we’ll make up any appraisal shortfall up to a certain dollar amount.” So if we’re offering $365, they might say, “so long as the property appraises for more than $350,000 we will proceed with the purchase without asking you to drop the price.” The reason people are doing that is because we’re not seeing a lot of appraisal deficits. The appraisers are doing a pretty good job keeping up with the market and they’re obviously very in tune with what the market is doing. And, most of the time, especially in the $300 and $400,000 price range, there are a number of comparables that justify the price. And especially when you get into $300,000 price range that’s a very competitive price point. And in any given neighborhood, you’re going to have, most of the time, a whole bunch of comps to justify that price. And you’re not gonna have any problem with the appraisal. But, in the event that you do, and a lot of times when we do have appraisal problems, it is because we have a small amount of square footage and we have a really high dollar per square foot amount. But people are willing to waive that appraisal because basically what they’re doing is they’re giving up their right to renegotiate the appraisal. They’re not locking themselves into purchasing the house at that price because you still have a financing contingency. You still have the ability, in each one of these contracts that realtors are writing, is the one thing they are not waiving is the financing contingency, which basically says the buyer has the right to terminate this contract and get their earnest money back if they don’t like the terms of their financing. And, that is in buyer’s sole subjective discretion, which basically gives buyers carte blanche to terminate and walk away and say. “I didn’t get a 2% interest rate, so I’m not happy with this loan.” I mean, these contracts are really written in favor of buyers and so it gives buyers a whole lot of of room to do that. And, sellers complain about that, and obviously they should, the seller really has no option to terminate a contract once they sign, unless the buyer breaches the contract. But buyers have all kinds of options for contract termination, like inspection, appraisal, survey, financing. So, in these competitive situations, a lot of times buyers will say, “I am willing to waive the appraisal contingency and I’m going to buy the house at the contract price, regardless of what it appraises for.” And again, we’ve seen plenty of times, well, no, I shouldn’t say plenty of times. There’s been a couple times where I’ve seen the property appraise for far less than the buyer was agreeing to pay and they got cold feet and they said, “even though I said I would buy the property at this price, now that I’m seeing this appraisal, I’m getting cold feet and I’m going to use my financing contingency to walk away.
So, I guess my point is, it certainly seems scary to say that I’m waving my appraisal contingency and I certainly understand that, but the reality of the situation is that you’re not locking yourself in you still have a financing contingency. You’re basically just giving up your ability to negotiate. Like, you could say, “seller, I want you to drop the price $10,000, cause it appraised for $10,000 below what I’m paying and the seller could say, “no way, you waived your appraisal contingency. We’re not willing to do that.” And at that point you’d have the option to decide if you want to proceed or if you want to walk away. Buyers are willing to do that just because that’s become the norm. And, it’s very rare that properties don’t appraise. I mean, I would say it’s less than one in 50, it’s probably more like one in 75. I mean, maybe other realtors have had different experience, but for us, we’ve not seen a lot of appraisal issues, especially in those lower price ranges. And, especially if we have a decent amount of square footage. Like I said before, a lot of times it’s the very small homes where we can run into appraisal issues. So again, you don’t have to do any of this stuff. We never push you into waiving and appraisal contingency if you don’t want to. And there certainly are plenty of times when we get properties under contract with an appraisal contingency intact. But, just know that your competition, in a lot of cases, is going to be doing that and you can decide whether or not you would like to do the same. The reason a lot of people do this is because on any given property, if you have a bunch of people offering at the same time, many of those buyers have been through the wringer already and they have lost multiple properties to these kinds of situations where they got really excited about a house and made an offer, made their very best offer, put their heart and soul into it. Probably wrote a letter to the seller saying, “look at how sweet I am and look at my family and I really want to buy your house.” And on and on and on, and they lost because somebody else made a stronger offer for a variety of reasons. And so, if that’s happened to you three or four times, you start to get a little desperate and you say, “we got to buy a house. We’re in a situation where we’re coming to town or we’re renting and our lease is up and we need to get a property under contract. And so, they kind of start pulling out all the stops and they start to get a lot more aggressive with their offer price and they get more aggressive with what they’re willing to wave as far as appraisal and inspection. And, those, a lot of times, are the people that win are the people that are kind of getting fed up with the process. And it is a hard process. I mean, you really have to want it. When I sit clients down and have these conversations and sometimes see the look in their eye, I understand. I don’t like this market. A lot of realtors are really tired of dealing with this market and are really ready. We’re kind of rooting for that interest rate rise to soften things a little bit. And in 2018 we saw interest rates go up nearly a full point. They basically went from right around four to right around five and everybody said, “this is going to be the thing that really changes this market and this is going to be the the downturn that everybody’s been expecting.” And we saw a little bit of a downturn, but not much. Fort Collins across the board, we still saw quite a bit of appreciation. I think Fort Collins did, depending on which kind of data set you pull from, did about 6%. Actually Loveland didn’t appreciate a whole lot during that period, but that doesn’t mean that there weren’t still plenty of competitive situations. And now in Loveland, it’s kind of come roaring back
Let’s do a little tangent here. Even though a lot of people consider Fort Collins to be the most expensive portion of northern Colorado, certainly it is with the exception of Longmont, being pretty close to Boulder where the median price is a little bit higher. But, a lot of people think Fort Collins is the most desirable place and is the most expensive. And, a lot of that’s because of the downtown area, and so it should be the most competitive market. But, the reality is that because Fort Collins has gotten so expensive, places like Loveland and Wellington and Greeley, who have lower price points than Fort Collins, those markets are actually appreciating faster. And, Red Feather Lakes, the Livermore area, Glacier View Meadows, that market has been going crazy because that’s where people are going to find affordable housing. And, so because you can get a lot more house for the money in those markets, those markets have actually become significantly more competitive than Fort Collins and are appreciating at a faster rate. So, alittle tangent there, but let’s get back to kind of the structure of the offers.
I think we’ve covered appraisal pretty well. Let’s move on to inspection. A lot of buyers are saying, in their offer, “we’re going to do an inspection and we retain the right to terminate the contract because of something that we find on our inspection, but we’re not going to ask for any repairs.” And, that’s kind of the benchmark of what people are writing their offer around. And there’s a number of different variations that you can throw in there. I mean, there are certainly times when, especially on a fixer upper, if somebody is going to go in and gut the house and do a big remodel on it in those situations, a lot of times, you’ll see people just completely waiving the inspection. They’re like, “we don’t care. We’re going to do a bunch of stuff anyway to the house, we’ve walked through with our contractor and we have a pretty good feel for what’s there and we’re not going to do an inspection.” So that’s kind of one end of the spectrum. The other end of the spectrum would be keeping your inspection completely intact and not making any representations about what you’re going do. You just say, “we’re going to do our inspection, we’re going to ask for repairs or repair concessions at our discretion. But, in the middle of those two things is this clause you’ll see a lot of people do, saying, “we’re not going to ask for repairs, but we’re still going to do an inspection.” And so what they’re saying is, “we’re not going to nickel and dime you, if we find like a huge sewer line issue or that we need a new $14,000 roof, in that situation we might come back and try to renegotiate. But for all intents and purposes, we’re going to try to overlook what we find on the inspection.” And so obviously sellers love to see that and that sweetens and offer a lot and you can decide and we can give you a pretty good idea, we’ve walked through a lot of homes and when we’re walking through the house initially we can usually kind of ballpark inspection stuff. I’ll be getting in the crawl space on an inspection and we can see has plumbing been updated, has electrical been updated on an older house. Obviously, we can’t see the sewer lines, that’s always a big question mark. And roofing is always another big question mark. But, a lot of times you’ll see a house where the roof has been replaced and the furnace has been replaced and you see electrical, a lot of those big ticket items, you start to add all those things up and you’re like, “this house has been updated quite a bit.” Obviously, you find inspection issues on every house, but sometimes we can ballpark and say, “I think this house is going to inspect pretty well” and you’d probably be okay putting that inspection clause in there where you’re saying, “we’re going to overlook small items.” We’re definitely having clients do that a lot. But, the nature of those kinds of clauses is that you’re having a lot of deals fall through, you’re having buyers make those representations. And then once they get in there and do their inspection, they find something. Maybe it’s not a big thing, but a lot of times it’s the sum. It’s like death by a thousand cuts. Maybe there’s not this one thing, but there’s so much deferred maintenance on this house and in those situations they might just walk away and get their earnest money back. I do want to stress that when you’re going through this due diligence process and you’re terminating a contract, you’re getting your earnest money back. The only time you lose earnest money is if you walk away from a deal right before closing, when all your contingencies have expired. Most of the time, when you’re walking away from a deal during your due diligence process, the only thing you’ve lost is the cost of your inspections, which is nothing to scoff at. A lot of times people would have $800 into a sewer scope, a general inspection and a radon test. So that’s certainly nothing to scoff at. But, a lot of deals are falling through because people are making these representations. And so, it happens, and sometimes you can go back to the seller and say, “look, I know I said I was going to waive the inspection. But things have changed. We did this inspection. There’s so much stuff, we have to renegotiate.” And a lot of times a seller is willing to do that, because they know that they’re probably going to be dealing with the same thing with another buyer. The exception to that is if the seller has a backup offer, which is another offer that is in position right behind yours, depending on how badly somebody wants the house, they might go shop their backup offer and say, “hey, these are the inspection items we’re dealing with and are you guys willing to tackle these inspection items and pay this price?”
So, they might kind of shop it around. And, in that case, the seller might say, “no, I’m not going to renegotiate because I got somebody else that’s willing to do to deal with this and pay the same price you’re paying.” Or sometimes more, a lot of times you’ll see backup offers put in place for thousands of dollars higher than your offer, because they’re trying to egg the seller on into terminating the contract with you and kind of stonewalling negotiations with their current contract so that the backup offer will fall into place. So, I know it kind of sounds crazy, and it is, this is a tough market to work in. And, you do have to really want to live in this area. And, that’s the thing, there’s a lot of people that do. Again, the cost of new construction, just the population increase, the entitlement process.
Another little tangent I’ll jump off on here is, if you’re a builder, a national builder, a lot of national builders would love to be building in Colorado, but the process of taking raw land from its raw state and turning it into a developable neighborhood with, what they call “curb and gutter,” which is all the infrastructure that needs to be put into place in order for a production builder to start building. That process, in almost every part of Colorado, is tedious. It’s very costly, it takes a long time, and a big part of that is water. And, as I said, we talked a lot about water in our bubble podcast, and you can definitely go check that out.
So the final thing we’re going to talk about today is lease back. I had some clients last week that were offering on a property and we were talking about lease back and they said, “we just don’t understand why anybody would do that. We’ve never heard of that before.” And so, I want to talk about lease backs and try to get everybody up to speed and understanding what that is. So a lease back, essentially you’re saying we’re going to buy this house, but we’re going to allow the seller to stay in the house after we close. So, we’re going to buy this house and at closing we’re immediately going to become the landlord and the seller is going to become our tenant because they want to stay in the property. And, most of the time the reason that people are asking for this is that they are looking for a replacement property within northern Colorado. So, the same competitive market where it’s difficult to make an offer, it’s difficult for those people to go and get another property under contract when their offer is contingent upon the sale of this current property. So, what sellers are trying to do is basically close on their current house, have the money in hand, and then be able to go shop for another property so that they can make a non-contingent offer on the sale. I hope I’m explaining that correctly, but when you do a lease back, so when you close on a house and then the seller turns into the tenant, they have the money in hand, they can go buy another house and they didn’t have to move all their stuff out and do a temporary living situation or put their stuff into storage. They’re able to go make an offer on another house that’s not contingent so they can make a strong offer and get another property under contract, perhaps in a competitive situation. So, a lot of sellers are requesting this, and in turn, a lot of buyers are offering this to incentivize the seller to take their offer. So, a lot of times when we are winning in competitive situations it is because we waived appraisal, maybe not waved it completely, but we said maybe we’ll make up a $10,000 appraisal deficit or, we set up an inspection expectation where we were going to overlook small things. And, then we offered over list price. And, then we also said, “hey seller, you can stay in this house after closing. We’re going to close, we’re going to give you your money and then we’re going to take a security deposit and we’re going to let you stay in the house after closing.
Now, the amount of rent that you charge to the seller is obviously a point of negotiation. A lot of my clients have been willing to let the seller stay in the house for free, because it’s another incentive. And, usually the lease backs are either two months or less. And, the reason that is is because lenders typically put a stipulation on their loans that say if we’re going to give you this loan, you must move into the property within two months. So, most of the lease backs or two months or less. A lot of times when they get into the two month range buyers we’ll start asking for some rent. It might be market rent. A lot of times it is a little bit below market rent or maybe they’re asking the seller to cover the cost of their mortgage during that period. But, a lot of times if we’re just doing a shorter lease back, maybe two weeks, maybe a month, buyers are saying, “you know what, stay in the house rent free.” And, obviously to a seller that looks like a pretty awesome deal. And it is. And that’s been kind of an ace in our sleeve as far as getting deals under contract. Obviously, it’s more expensive for our buyers, but sometimes that’s what you got to do. So, the buyer that I mentioned, that was kind of looking at me like I was crazy for suggesting this lease back, I understand where he’s coming from, but, he said, “well, what if there’s damage to the property when we move out and what if they move all their stuff out and they see like a physical defect in the property?” And, again, you have to look at it in the sense that you are becoming a landlord. And, there’s always a little bit of faith that comes with leasing a property out to somebody else, but we have done this many, many, many times and we still have not had one single issue with one of these lease backs. People that own a house, they’re not going to just go and trash their house right before they move out. And, we do take a security deposit. Sometimes we do, sometimes we don’t, but most of the time we take a security deposit and obviously that’s up to the buyer. But, this is a house that they’ve owned and loved for a long time. They take very good care of it and that’s not going to change just because they sold the house. I think if anything, they probably would start to take better care of it and be more careful in the move out process because they know that they have become a tenant. And so, that is kind of the icing on the cake as far as the four things that we’re doing.
Another thing I’ve been doing lately is I offer a free professional home cleaning. And, this is like, my discretion as far as where I do this, but sometimes just to incentivize the seller a little bit more, I’ll put in the contract that the buyer’s agent, Ryan Jenkins will use a professional cleaning service to clean the property upon the sellers moving out. And, this is to relieve the seller of the burden of cleaning the property after move out. Because, the last thing that anybody wants to do once they moved all their stuff out is just go back and clean everything. It’s an emotional time, and you just kind of want to walk out and be done. And, so a lot of times that can be the little thing that pushes us over the edge and gets us the house when a lot of other folks weren’t willing to do that. So, I hope I didn’t scare people off. I guess this is what we’re dealing with in this market right now, and I actually just read a headline in the news saying that interest rates are pulling back again, back to like 4.1. So, we are not really seeing an end to this market in the immediate future, as I mentioned before.
Not every house is going to be competitive. Like I said, it’s it’s somewhere in the neighborhood of half the homes that we offer on are competitive. But there are certainly times when our clients find a house and nobody else is offering on it and we can offer list price or something below list price depending on how it’s priced. , and so I don’t want to you to think that this is the only way to buy a house, but you should be prepared because it’s certainly a possibility and in most cases of probability that you will be in one of these situations if you are buying a house. And as far as the selling side goes it can also be nerve wracking on the selling side. I mean, you have a nber of people making very strong offers.
It can be a little bit disconcerting as far as like which offer you decide to go with. , and it can feel a stressful because you’re letting a lot of people down. I know as an agent working with a seller, it’s really hard to make those other phone calls because that people have put a lot of time into writing these offers and evaluating the property and , have some emotional attachment to the property and , so it’s really hard to tell those people that they didn’t win. , and sometimes people get angry. And so it’s it’s not easy on the selling side either. Even though , you have, uh, a guaranteed sale there’s still some feelings that are going to be hurt and disappointment. So I hope that has been helpful for you guys. , thank you again for listening.
Just want to kind of reach out and say if you have questions, we would really love to answer those questions. I always want folks to know that , a big part of our job as realtors is educating you and also being super patient. I mean, if if you want to evaluate the market and start and get out and look at property and , you’re not sure about all this multiple offers stuff and we always want you to know that we’re going to hold your hand through the process and you’ll never be pushed to make an offer. You’ll never be pushed to do anything you’re not comfortable doing. you’ll never be pushed to sign a contract locking you in to working with one of our agents. I mean you have full control.
I think a lot of people have the perception that agents can kind of be pushy and sales mini and try to like coerce people into doing stuff that’s just absolutely not the case. , at our brokerage patients is something that we look for in our agents and something that we want to perpetuate. And I think if you read our reviews, you’ll see that a lot of clients are using the word patient to describe our services. And , we just want to, we want people to feel comfortable. It’s a big purchase. It takes all, a lot of times it’ll take three to six months, sometimes even longer. , from the time somebody starts working with us until they actually close on a home. And so we just want you to know that we’re kind of in it for the long haul and we want to educate you and make you feel totally comfortable and work with you to sell you the right house, not just the first house or , a house that we can find quickly.
We want to find an awesome house for you. So, look us up on the web, greyrockrealty.com. Read our Google reviews and feel free to call me directly. My name is Ryan. My phone number is (970) 689-0824. Again, it’s gray rock realty. We are in Old Town Square. We have an office in Tremble Court, so feel free to call us or you can pop in. We are available by appointment. We’re not always in the office. Sometimes when people might walk by and not see an agent there but feel free to just call, reach out and call us, (970) 689-0824. If you can also call the office line at (970) 672-0775, we have an awesome team of agents that would love to move mountains for you and find you a great house or give you a market analysis on your current home and help you maybe transition to a different home within the area or move out of town, whatever the case may be. So thank you guys again, so much for listening. Have an awesome day. We’ll see you next time.
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