Category: Multiple Offers (2)

Multiple Offers

Multiple Offers

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.

3. Logistics.

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.

 

multiple offer

How to win a multiple offer

While most Buyers dread being in a multiple-offer situation, with a little preparation Home Buyers can win a multiple offer situation without necessarily paying more money. To win that house you’ve been pining for, you’ll need a battle plan. Here are eight key steps to craft a winning scenario:

1. Address the  potential for a multiple-offer strategy right from the start   When you initially meet with your Realtor, address the  possibility of a multiple offer scenario on any property that you discover and understand your options. Here’s what you need to know:

First, you can enter the negotiation as if you are not competing. Second, if you really want the house and the value is apparent, you can offer close to list price with enticing terms. If you can’t live without this house and the list price is reasonable, then it’s smart to offer full price or somewhat above the asking price. The final option is to simply walk  away if a competitive offer scenario ensues. Run through and discuss these scenario’s and determine how you will handle them if it were to occur without the pressure and emotion of the actual moment upon you. This will provide you a solid framework to reflect on in the heat of the moment, if and when it does occur.

Remember that while you are calling the shots in the negotiation (ie: it will be your house and it’s your decision as to how the offer should be negotiated) you can benefit a tremendous amount from the experience and advice of your Agent who has experienced this event numerous times.

2. Be readily available to view properties and react  This point really attempts to preclude a multiple offer situation, but it is so important that it’s worth mentioning. Make sure you are flexible to view homes at odd times or earlier in the day than most people are able and this will give you an advantage in being the first to view new listings. If you do spot a great home that you know is right then do not delay in offering. You can always add a condition to ensure you haven’t overlooked something but acting quickly could get you the home you want before the competition sees it, and may preclude a multiple offer situation from the outset.

3. Insure a proper presentation   Find out which other Agents have written offers so you know what you are competing with. Your Agent should know the experience and track record of these other Agents. If the Listing Agent has written one of the competing offers then common protocol often requires that the office manager (or other third party representative) be present during the multiple-offer presentation, to ensure the Listing Agent does not unduly favor the presentation of his own offer.

4. Ensure you allow the right amount of time to keep the offers open    Prior to the time you present your offer, ensure that your Realtor enquires about the time parameters required to present the offers. You want to ensure that you have enough time to properly respond while not encouraging yet further offers to enter the competition allowing the negotiation to drag out over a long  period of time. Make sure that you are readily available to accept or counter the Sellers terms – this can make the difference and in some cases your Agent will ask you to wait in the car (or be nearby) while they are presenting your offer in case you need to make any last minute changes to get the deal.

5. Pre-Approval, not  just Pre-Qualification    A good way to be prepared for a multiple-offer situation is to obtain a pre-approval letter from their lender.  “Pre-approval” means that the lender has checked your credit and that you will be approved once the title work and the inspections are  complete. A pre-qualification letter means that the lender has looked at the  application but has not checked the borrowers’ credit. Consequently, you should try to obtain a  pre-approval, over a pre-qualification letter. Make sure that you have this in your file and include it when you present your offer. Better yet, eliminate the financing condition altogether if you are confident in obtaining your financing – first be sure to consult with you Realtor and Mortgage Broker/Banker on the risks associated with doing so.

6. Outflank the  competition    There are a number of ways that you can make your offer  stronger than your competitors’ offers. First, you can allow the seller to select the closing date.
Another approach is to shorten the due diligence periods.  In some circumstances, you may even eliminate the loan or inspection conditions entirely, (for example if you are tearing the home down) but be cautious in doing this and ensure that you consult with your Agent. Often Sellers will take an unconditional offer of less value than a higher offer that has conditions attached. Smart Sellers know that when the stars align and the have a multiple offer situation, this is the best situation they can expect and once everyone sober up from the party (and the property is longer on the market) they may not achieve nearly the same level of interest again

Also try to be flexible about any  special needs the seller may have, such as leasing back the property or taking  something such as the big-screen TV that is currently attached to the property.

7. Don’t be afraid to  ask    While there is no obligation for the Seller’s Agent to disclose what offers are on  the table, don’t be shy about asking. You could ask, “What has the seller turned down?” Whether or not you receive a response is debatable. Many times, especially  when their circumstances may have changed, sellers have ended up taking much less than what they turned down at an earlier date.

8. Be prepared not to get the property   No one likes losing a house that they want. In fact, some  people can become quite upset especially when emotions are involved or you have been looking for some time. Understand that there will always be another property around the corner that comes available and sometimes it’s even better than the one you lost.

Multiple offers can be challenging, but if you will follow  the simple guidelines above, you may be surprised how often you’re taking a closed transaction check to the bank. These suggestions just scrape the surface of the possibilities that multiple offer situations can offer. By far your best offense in these situations is to ensure that you have the best, most experienced Agent possible representing you. Since the markets which multiple offer situations flourish occur sporadically, having access to the broadest depth of experience possible will increase your opportunity for success. Sano Stante Real Estate group has over three decades of expert real estate marketing and negotiating skill that you can have on your side of the table. Call us today.