Buying in this market? You might need MOR money!

By Kathy Schmidt, Broker/Owner, Schmidt Realty Group Inc.

No, that’s not a typo.  MOR stands for Multiple Offer Reserve.  What’s that?  It’s the amount you might need to offer over list price in a multiple offer to be the one to get the house.  For example, let’s say you’ve got your eye on a 3-bedroom bungalow in Lendrum that’s had a few updates to it and is well located. That’s the kind of home that a lot of buyers are looking for so you can pretty much count on competing with other buyers for it.  Let’s say it’s priced at $450,000.  You might think that offering list price will get you the house.  It’s possible, but in the case of multiple offers almost certainly someone will offer over list.  How much is impossible to know, and this is where you need to lean on the advice of your REALTOR®.   While you don’t want to pay more than it’s worth, if you’ve lost a house or two already in this market you might be willing to offer a little bit extra over and above what you think the value is, just to be the successful buyer who gets to move in.  Getting back to our example, if the house is listed at $450,000 and your agent confirms the value seems fair based on a current review of the market you still might need to offer over list price just to win the bidding war.  It can be hard to get your head around it, but here’s one way to think of it.  If you offer $461,000 for instance, you could look at it like you’re paying $450,000 for the house and $11,000 as insurance to be the one to get to move in.  That $11,000 is your MOR money. Your Multiple Offer Reserve.

What does this mean for how you search for homes? Well, if the top end of your budget is $450,000 based on what you and your bank say you can afford, you might ask your agent to limit your search to homes priced up to $425,000 or $435,000. That way you’re looking at homes you can have a good chance of being able to buy if you find yourself in a multiple offer scenario.  It’s important to discuss this with your agent so you all have a realistic idea of what the financial constraints are from the bank, and what your limit is for your personal comfort and family budget.

Another way to win the day is to write an unconditional offer. This means no financing, no inspection, no review of condominium documents etc.  This can be a valid option for very experienced purchasers with deep pockets and high risk tolerance.  This strategy is not advisable for everyone.  First time buyers especially are better off to adjust their price range down and put in a strong offer using their MOR money. If yours is the highest offer, even though you have conditions on it, there’s a chance that the seller will put you in first place.  Sure, some sellers will always vote for “unconditional” every time, but in order to maximize your opportunities to get the house you really want AND manage your risk in the process, adjusting your price down and using your MOR money is a smart alternative.