You have listed your home for sale and have done everything your real estate agent asked you to do to make this the most successful transaction possible. You have followed all the proper home seller etiquette for a fast sale; cleaned up the yard, staged your home, and put the dog away during showings. And now, BAM! you got an offer. But wait! BAM! You got another offer.
You and your agent have obviously done what it takes to sell your house and now - lucky you! You have multiple offers from which to choose. Surely, with such a scenario, you'll come out on top of this deal and might even be able to play the potential buyers against one another, getting the most possible for your lovely home and maybe even a little extra money to spend on your next home in a hot real estate market. Right? Maybe. Or maybe not.
The Art of Negotiating Multiple Offers
Sellers automatically think that receiving multiple offers on their home means the ball is in their court and that they can manipulate hungry buyers into giving them want they want, all because the buyers are bent on purchasing that particular home. But years of experience show that this is not always the case and that multiple offers coming in at the same time can just complicate matters. That is why sellers need an agent who is well-versed in handling such a situation.
There are many different approaches to negotiating offers when multiple buyers bidding on your home. If you have secured the services of an experienced real estate agent, he or she can take the time to explain each one to you. They can also talk to you about the advantages and disadvantages of going ahead with a particular strategy.
However, remember that in the end - the decision is always up to the buyer. All of that said, it is sometimes difficult to predict which strategies will work, but it is good to know a little about each one before you get entangled in what could either be either a blessing or a curse.
The Best Offer
The "Best Offer" strategy is probably the easiest way to handle multiple offers. To find the best offer, you and your real estate agent will peruse all the offers in front of you, considering not only price but also issues such as terms, the amount of money down, settlement date, contingencies, and whether or not the buyer is pre-approved for a mortgage or paying cash. After considering all aspects of each offer, choose the one that best suits your needs (which may or may not be the highest price), thank the others, and continue on your way to settlement.
Counter the Best Offer
If the "best" offer is not quite where you want it, you may counter that offer and reject the others. Of course, this holds some risk as the buyers you are countering may not go along with your new terms. At that point, you may lose not only that buyer but the others that you rejected as well.
Counter One Offer & Hold the Rest
This is similar to the previous scenario except that you are not going to reject the other offers outright. Instead, your agent will inform them that you are considering another offer and if that one does not work out, then you will look at all subsequent offers.
This strategy could work in your favor but, again, it may not. Buyers, like sellers, often do not like to be left waiting so they may not wish to remain in limbo while you negotiate with your first choice of buyers. Hence, you still stand a chance of losing buyer 2 and 3, who may have already developed the attitude that they have no chance of their offer being accepted.
Buyers Bidding Against Each Other
In this scenario, your real estate agent can inform all potential buyers who have placed an offer that there are indeed multiple offers on the table and that you would like for them to go back to the proverbial drawing board and make the best offer possible.
This can go two ways:
1) A buyer that is determined to purchase your house may go back to their agent and up their purchase price or improve other parts of the offer and resubmit it, or
2) The buyers may feel as if they've already done the best that they can do with their original offer, so they will walk away from the deal. If everyone chooses option #2, the buyer winds up losing all the offers and is back to square one. So, you will either wind up with a spirited competition among two buyers or no offer at all.
Keeping Buyer's Agents Informed
While it is possible that any of the above scenarios could occur during negotiations with multiple buyers, it is important to remember that an essential part of all of this is keeping all parties informed as to what is transpiring. In other words, constant communication is essential on the part of the seller's agent, or there is a risk of losing many or all of the offers.
Listing brokers need to stay in regular contact with the buyer's agents, letting them know whether or not they are still in the running or letting them off the hook so that they can continue their search for the ideal home.
Furthermore, buyer's agents who are responsible for writing counter offers should also make these promptly so that their client has the best chance possible of obtaining the home they want. That means they should let the selling agent know where they stand and when to expect a counteroffer, etc. If they wish to cease negotiation, they should inform the listing agent immediately.
Treating all parties involved as fairly as possible is the name of the game. That means being honest with all sides, not giving preference to one particular party, and presenting and reviewing all offers and counteroffers promptly and reasonably. The Realtor Code of Ethics spells out these scenarios, and if one suspects that this code was not followed in agreement with standard real estate laws, then inquiries should be made.
Look Closely at the Contingencies
When trying to decide which offer is truly the best, don't forget to explore all the contingencies attached to each one. It's easy to overlook a requirement for multiple specialized home inspections that other buyers haven't designated and end up with a sale that takes longer to close than expected. Every buyer will want a basic home inspection, but some may require three or more specialists to come in as well before they'll make their decision. Other contingencies tend to fall into either the appraisal or mortgage approval category. If you can find a buyer without a mortgage approval contingency because they're paying out-of-pocket or already have a financing agreement in place, you can dramatically reduce uncertainty about the sale.
Only One Winner
Unfortunately, in the case of multiple offers for one home, there will be those that lose. Someone will walk away disappointed for not having been able to buy their dream home, but if everything is handled in an equitable manner, the seller should NOT be the losing party, but should walk away with a deal that is in their best interest.
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