Should buyers make offers on multiple homes at once?
Homebuyers are increasingly making offers on multiple properties at the same time, according to Redfin. The tactic may or may not make sense for buyers, depending on the market and whom you ask.
The bidding wars convulsing many real estate markets are reportedly driving more homebuyers to adopt a somewhat cynical tactic: making offers on multiple homes at once.
Is the tactic kosher?
Some agents shake their heads vigorously, condemning the practice as unethical and counterproductive. But others say casting multiple bobbers can be necessary. The tactic’s viability also may vary by market.
Just over half of respondents cited multiple offers as the biggest obstacle for buyers. That’s up from 40 percent three months ago, when low housing inventory was cited most often.
The fierce competition has “given rise to an increasing challenge for buyers and sellers alike — buyers strategically making offers on more than one house at a time to increase the probability of getting an offer accepted,” Redfin said in a press release on the survey.
Purchase contracts falling through
The most common reasons why purchase contracts fell through last quarter hints toward the trend.
About four out of 10 agents said “negative or surprising inspection results” were the most common reason, while 25 percent cited “buyers simply changed their mind.”
A mixture of these causes often sink purchase contracts that involve buyers who’ve made offers on multiple homes, said Redfin agent Jeremy Paul in San Diego in a statement.
Those buyers often make offers at prices they can’t afford. The idea is to lock down a home with every intention of negotiating the price down once they can cite imperfections uncovered by a home inspection.
“When the seller won’t budge” when asked to lower the price, “the buyers move on,” Paul said.
Lessons for sellers
The multiple-offer tactic is part of the reason why homesellers should remember that the highest offer isn’t necessarily the best one, according to Redfin.
Sellers and their agents should carefully vet offers to consider factors other than price, including a buyer’s level of commitment to a home and how willing or able they are to close, the brokerage says.
Does it make sense for buyers?
But from the perspective of a buyer, does the tactic make sense?
Depends on whom you ask.
Lee Arnold, a Fallbrook, California-based broker, says “you almost have to” make offers on multiple properties at once in Southern California.
“With little to no inventory, it’s almost imperative that you have back-up plans in case you lose out on your first choice home,” Arnold said. “It’s not so much a strategy as much as it is a necessity to make sure your client gets a house.”
But casting a wider net through multiple offers can also backfire, some agents say.
If two or more offers are accepted, backing out of one might not always be easy, depending on the state.
Tracey Freeman, a Westfield, New Jersey-based agent, says even if canceling an offer is easy, the multiple-offer tactic is still a losing proposition for both agents and buyers.
Buyers who make multiple offers on homes usually aren’t fully committed to purchasing both homes, putting the buyers at risk of making a mistake with the biggest transaction of their lives, she said.
And, at least in Freeman’s market, agents can jeopardize their reputation by representing buyers that make offers on multiple properties at once, she said.
Buyers can also arouse a lender’s suspicion by scattering offers across more than one home, according to Leslie White, a Washington, D.C.-based Redfin agent.
“If your lender knows you are under contract on one home and then gets a call about your preapproval from a listing agent for another home, that will raise red flags and the lender is going to think twice about working with you,” she said.
The best way for a buyer to compete in a frothy market is to prepare offers for multiple homes in advance, and then strategize with an agent about which to submit first, taking into account both preference and any offer deadlines, according to White.
That way, White said, if the first offer is turned down, the buyer can then immediately pull the trigger on another.