So you think you want to buy a house that has multiple offers on it?
What I am about to suggest is called The Better To Be Lucky Than Good Plan and it’s success can largely depend on what your connection with karma is with the Gods in Charge of Decisions on Bank Owned Properties.
Step One
Once you have found a house and you realize that there is currently multiple offers in on it – maybe even at least one of them is for cash, it is time to get creative. In this case, creative is known as something called an escalation clause. The escalation clause can be worded in a number of different ways, but the essence of it is “buyer agrees to pay X% or X$ over the next highest offer.”
Step Two
Being creative can be fun, but unless you are also smart and creative, it could backfire on you. So now that you have been creative, you can protect yourself by being smart. Being smart in this case requires that in addition to your escalation clause, you also use a “subject to appraisal” clause such as this one The Phoenix Real Estate Guy stated in the comments from a post I wrote last week:
Appraisal Contingency: Buyer’s obligation to complete this sale is contingent upon an appraisal of the Premises by an appraiser acceptable to lender for at least the sales price. If the Premises fails to appraise for the sales price, Buyer has five (5) days after notice of the appraised value to cancel this Contract and receive a refund of the Earnest Money or the appraisal contingency shall be waived.
Once you have submitted your offer that is both creative and smart, it is time to sit back and let the fun begin. From what I can tell, the people who work for the Gods in Charge of Decisions on Bank Owned Properties are seldom able to turn one of these offers with an escalation clause in it down. I am sure it happens, but I just don’t see it happen very much.
Step Three
Once the offer has been accepted by the people who work for the Gods in Charge of Decisions on Bank Owned Properties, it is time to order the appraisal. Due to HVCC laws, appraisals today can be tricky and usually drive people nuts… but in this case, don’t let it drive you nuts – if the Better To Be Lucky Than Good Plan works out, you are about to save some money and be able to buy the home you want.
Step Four
If my math is correct so far, once you get the appraisal back, you will quickly realize that as a result of you being creative, you currently have an offer in that is possibly tens of thousands of dollars over the appraised value of the home.
Good thing you were also smart. Now is the time when you go back to the person who works for the Gods in Charge of Decisions on Bank Owned Properties and ask them which one of these three choices they want to pick:
- Cancel the contract because the property did not appraise for the sales price
- Get a different appraisal done with the seller paying for it
- Negotiate with the seller to lower the sales price to the appraised value
How do you tell if you are one of those people who think it might be better to be lucky than good?
The person who works for the Gods in Charge of Decisions on Bank Owned Properties chooses door number three from the choices above and you end up with the house you wanted at the appraised value.
It might be easier than you think to be lucky… especially if the short sale department happens to be part of the “Retard Division“.
Other Recent Multiple Offer Thoughts:
Escalation Clauses: Bad or Good?
Multiple Offers and “Winning” The Bidding War
Disclaimer: I am not a Realtor but I get to watch them work every day and most days it is more fun than not. Be sure to consult with a licensed Realtor before trying any of this at home.
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