I hate multiple offers.
First, I should define the term, for the laypeople out there. Multiple offers are situations where the offers to purchase number more than one, and thus the term “multiple.” I know it’s complex, but that’s the kind of stuff they teach us in real estate licensing school.
Now that you know what multiple offers are, you should also know that I hate them. Sure, I don’t hate them like, say, I hate Snooki. (To be fair, I don’t really hate Snooki – I don’t even know her. I just hate the idea that she is somehow out there being all rich and famous for, well, nothing while I am blogging in anonymity about something really important like multiple offers.) No, multiple offers are more like eggplant. I can deal with it, but I would rather not.
First know that this is a contemporary topic. Suddenly, in our market, it seems that every home that is standing sort-of upright and is priced within a furlong of market value is attracting multiple offers. I am seeing this throughout the I-15 corridor, but I am also hearing the same stories from some of our richer coastal cousins. What gives?
Inventory. We have none. Take Scripps Ranch. Zillow shows 161 detached homes on the market this morning. If only! In the 92131 Zip code, our MLS includes (drum roll) 47 homes available for sale. That represents approximately 0.6% of the standing inventory. Need a home under $700,000 so your 20% down payment can bring you within high-end conforming loan limits? You’ve got 17 homes to choose from.
And, trust me. Buyers are out there. Steve’s Realtor-mobile is starting to look like one of those circus cars (and, no, I am not suggesting Steve is a clown). The buyers keep piling into the back seat but no one comes out. They are all waiting on new listings.
Where have all the listings gone? The recession ate them. Too many would-be sellers don’t have the equity to sell, so the discretionary move market has been severely hog-tied. Many others, who do have equity, are simply making the decision to stay put, banking on future price increases and a better payday.
The irony is that amidst all of this, while prices are creeping in some segments, they are doing so ever-so-slowly. It may turn out to be a seasonal thing – or not. Only time will tell. In the meantime, multiple offers are a reality.
Did I mention that I hate multiple offers?
Sure, when I am representing a seller, it is a glorious thing for my client when a whole bunch of people decide to throw their checkbooks at his head in unison. Over the weekend, I had a little listing priced slightly above recent comps that generated eight offers. Within 72 hours, we had to suspend showings so that we could catch our breath and sort things out. That’s not the part I hate.
The difficulty with multiples is that they tug at the old heartstrings. With a typical one-offer negotiation, the conversation typically goes something like this.
Buyer’s Agent: I am pleased to present this offer on behalf of my clients to purchase your listing. For $5.
Seller’s Agent: But the asking price is $800,000!
Buyer’s Agent: Yes, but we have reviewed recent sales, and this home sucks. The appliances are not Viking, the fixtures do not have the requisite gold plating, and your hair looks like it was styled by angry hedgehogs. We don’t like you. Or your client. Or this home. Accept the offer or we walk.
This confrontational approach is understandable. Despite the low inventory, this market continues to defy the laws of supply and demand. It is still a buyer’s market. Ask Case and Shiller.
But now we are seeing multiple offers, which, by the way, I hate. In multiple offer situations, the interpersonal dynamics change — like magic. The same adversaries who could only speak in complete dollar signs yesterday, the ones who would gladly have thrown the seller and his Schnauzer under a school bus for a $3,000 carpet allowance, suddenly become humanitarians of the highest order. They are deeply caring, compassionate individuals who each have a unique personal story to tell.
Enter the sappy cover letter.
There is nothing wrong with the sappy cover letter; I’ve written hundreds of them. And they all read something like this.
Dear Mr. and Mrs. Seller,
Thank you for allowing my clients to tour your home. We are sorry for the inconvenience, and we will be forever in your debt. We left you a bundt cake on the counter.
Mr. and Mrs. Buyer have been looking for a home just like yours for 39 months, and now they have found it!
My clients are well qualified. Mr. Buyer runs a local non-profit food bank, and Mrs. Buyer has devoted her life’s work to searching for a cure for kidney disease, ever since she donated her own kidney to a young inner-city homeless boy. When she is not causing stem cells to differentiate, she enjoys raising her five young disabled children who spend their summers doing missionary work in orphanages in various third-world countries – like Texas.
My clients have outgrown their current studio apartment. Their lease is month-to-month. Therefore, their timing can be flexible to meet your needs. By the way, they really enjoyed meeting your puppy! Their own Schnauzer was run over by a school bus last month while trying to save a toddler who had wondered into the street, and they look forward to putting your dog run to good use as they foster rescue animals in Scooter’s memory.
Please accept our offer for $5.
And here’s the problem for the listing agent. You will have five or eight or ten of these letters, each more emotional and compelling than the next. Your client will select the “best” offer (“best” usually defined as “most money”), and you will be left to make the phone calls in which you proceed to squash the hopes and dreams of multiple families. It’s not fun.
That’s what “multiple offers” really means – “multiple families.” That’s the hard part.
Caveat emptor: One word of caution about deploying the sappy cover letter. Even the most compassionate seller and listing agent will consider other things: Namely, the reputation of the buyer’s agent. Because, you see, it is the buyer’s agent who they are going to have to work with and rely on (to meet time frames, to perform under the contract) throughout the process. It won’t matter how much of a tear-jerker your story is if your offer is filled out with a crayon or the listing agent has to rewrite the contract for you. That’s a big-old red flag, an indicator of how the next thirty days might go. And if your agent is not well-liked, lacks respect among his peers, or is not perceived as entirely competent, this will become a big factor at decision time. Just sayin’.