You Should Be So Lucky - Multiple Offers
In a seller’s market, especially one with very few listings in a price range of interest to numerous buyers, it is not uncommon to receive multiple offers or to have a bidding war break out. That means there are buyers literally trying to outbid each other to buy your home.
What’s the poor seller to do?
Feel very fortunate, of course.
Agents who know the market well can usually tell in advance whether your home is going to attract multiple offers. They’ll hear and see the buzz even before the first open house. In some markets agents are advising clients to set very competitive asking prices — perhaps even setting them low — just so they will attract multiple bidders.
Your agent might suggest the following strategy:
- Scheduling a limited time period, perhaps one week, for anyone interested to see the house
- Telling anyone who wants to make an offer that you will accept written offers until 5 p.m. Friday and get back to the successful bidder first thing Monday morning
You then spend the weekend deciding which offer to accept — or to counter.
Which to Accept?
You’ll almost certainly reject any offers for less than your asking price, contingent on the sale of a house, or on receiving an inheritance from Aunt Millie. But what you pursue is up to you. Will you accept the highest offer? The offer with the fewest contingencies? Some combination of both? The bidders are at your mercy.
If it is very clear which offer you want to accept, go ahead. Sign it and get it back to the buyer. But just in case something goes awry later, choose one or two backups. Let those folks know they are number two or number three in line.
If you are working on your own without an agent in a multiple-offer situation, one expert suggests that the seller’s strategy should be to tell buyers that offers will be reviewed in the order the seller was contacted.
This scenario assumes that you are sitting down face-to-face at the kitchen table to receive offers from potential buyers or their agents, and that meeting with them in order is a fair way to proceed that could eliminate later complaints of unfairness.
Even if you accept multiple offers only on one day, you should tell everyone when you will make your decision.
Chances are good that if your home is well priced, most if not all of the offers will be at the full asking price or beyond.
You may choose to make a counteroffer in a bidding war although most buyers working with an agent will have been advised to make their first offer their best offer because they aren’t likely to have another chance. On the other hand, perhaps you simply want a different closing date. Or a first offer may contain a clause promising $1,000 more than the highest bid. You never know.
What to do with a fistful of offers? Rejoice, of course. Then you might prioritize those worth consideration, numbering them one to five, for example. If your first choice works out, the home is sold. If not, work with number two in line and so forth until you have a deal.
Do You Have to Accept One?
The risk of initiating a bidding war is that none of the offers come in as high as you'd like. You are not legally bound to accept any of the offers, but you might end up paying a buyer's agent commission if they bring you an offer for the full listing price, and without any contingencies. Yes, even if you do not accept the offer. It's definitely worth checking whether your market is hot enough to try the bidding war approach or you could be out of pocket for a chunk of change.
A slice of real life
One couple with a single-story, two-bedroom, one-bath home in a desirable urban neighborhood listed the house at the price they wanted for it — $499,000. They did not assume there would be a bidding war, but when the property appeared on the Multiple Listing Service it was noted that on a certain date, the owners would review all offers, if any had been submitted. They left town for the weekend and returned to find three offers — all for $25,000 over their asking price.
How did they select their buyer? They took the cleanest offer, that is, the one with the fewest contingencies. It also was accompanied by the largest earnest money check. And the successful buyer had hired an inspector to go through the house before she made her offer so she wouldn’t be surprised later.
The sellers carefully evaluated all three offers. But the other two had more complex financing and inspection contingencies.
A couple of the agents had included letters with personal detail about their clients, but the couple ignored them. And they never met face-to-face with any of the buyers or their agents. They stuck to business.
Their house was on the market for only six days.
Next article: Closing on a House for the Seller
Previous article: Structuring a Seller's Counteroffer
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