While you may think that receiving two or more offers on your home is a great situation it actually presents some disadvantages. For properties that sell with a single offer, the fallout rate is 10 percent. For properties where there are two or more offers, the fallout rate increases to 50 percent. The reason there is such a significant difference in closing rates is that Buyers often feel they were unduly pressured by the multiple-offer situation. After Buyers have time to reflect upon the situation, they often get cold feet sensing they were pressured or paid too much. To minimize the fallout and improve your chances of success here are a few tips on how to best handle multiple offers when you are the Seller.
1. Try to have a Manager present.
Your Agent’s company may have a variation on this policy; still it is good practice to request a Manager or third party be present. The Manager may ask the buyers’ agents and you to come to their office since they will be overseeing the multiple-offer process. This gives your representative Agent the best control of the situation as well as insuring that your Agent will have all the tools they need to handle the situation.
2. It may be legal to shop your offers, but is it the right thing to do?
Whether it is legal or not to tell the Buyers how much the competing offers actually are, it may be simply unethical to disclose the contents of competing offers to others. First, ask your Agent about the regulations in your area. Even if you do have the right to disclose the other offers, creating a bidding war may often results in buyer remorse that can increase the odds of your sale falling apart later. Instead, ask all Buyers to bring back their best offer. This increases the probability that your deal will actually close.
Your Agent should explain the presentation guidelines to each party who presents their offer prior to hearing the offer. This includes deadlines for counteroffers and how they will be presented. If the buyers’ agents are presenting their offers in person, allow them to present their offers privately, one at a time.
4. It’s the sellers’ house, and it’s the sellers’ decision.
You (the Seller) decide which offer you want to accept, or if you want to counter all the offers. If you decide to make a counter-offer, you should only counter one offer at a time. Although Sellers may counter offers any way you choose, be advised that if you make too aggressive a counter-offer it increases the possibility to have both sets of buyers walk away from the situation. Remain sensible about the real value of the property in light of your apparent windfall of interest.
5. When the Listing Agent has their own offer.
If your Listing Agent has their own offer on the property, ensure that you receive a prior explanation of Agency and how all the parties are being represented. In these instances it is common to have the Brokerage Manager present to ensure that other Buyers had their offers presented in an unbiased fashion.
6. Avoid selling your Home twice.
If you have an existing pending offer that is subject to a Buyer’s condition (ex. sale of their home) and that allows you to continue to market the property, or if you choose to accept a backup offer, ensure that you insert the correct language in your offer to protect you from selling it to two parties. Make certain that you (the seller) accept any subsequent offers with a written provision that your acceptance is conditional upon the collapse of the existing pending offer.
7. Don’t make it a race.
Have all parties agree on when to reconvene to consider the buyer’s responses to the seller’s counteroffer. Turning a multiple-offer negotiation into a race doesn’t benefit the seller and it greatly increases the likelihood that the transaction won’t close. Usually 18-24 hours is sufficient.
8. Ask for the Buyer’s best offer.
Advise the Buyer that the Seller will be making his final decision on the multiple offers at this second meeting. Ask the Buyer to bring back their best offer. If you need to clean up some minor points, an additional counter may be appropriate.
9. No verbal negotiations.
Always make sure that everything is done in writing. Sometimes in a single offer situation the Agents agree on the terms until they can physically meet to sign the documents, but this is only a trust condition between the Agents, is not legally binding and can be precarious. Furthermore, Agents should not sign on behalf of the Seller except with prior written authority– always best to use one of the digital document signing services, scan and email it, or even fax it.
10. Proceed with caution.
If you have a counter-offer out and you receive a new offer that is better than the one on which you are negotiating, you have two options: rescind the current offer or wait until it expires. In some cases, a better course of action may be to allow the existing counter offer to expire and inform both Buyers that they are now in a competing offer situation, and to present their best offers.
When the market is ripe for multiple offers there are many (more than the above) tactics that a Seller can use to ensure that they extract the best price while ensuring their sale closes without further issue. There can be as many permutations of these situations that can arise as exist tactics, and by far the best strategy is to have the most experienced Agent on your side. In a heated market (that generates multiple offers) is where the real value of an experienced Agent proves out. Call Sano Stante Real Estate Marketing and put over 31 years of expert knowledge and experience to work for you.