Recently I was in a multiple offer situation with a buyer looking to purchase a home in Chelmsford MA. Which is what prompted me to write this article. Current market conditions with low inventory and good homes moving quickly can see a Massachusetts home seller having multiple offers to review at the same time. Following is a guide on how to handle multiple offers.
The Givens When Handling Multiple Offers
The first thing to remember when you are wondering how to deal with multiple offers is your listing agent works for you and can counsel you based on their years of experience. Ultimately how you handle multiple offers and negotiating is up to you.
Secondly, your REALTOR is under obligation to divulge multiple offers if asked by another agent with your lawful instruction. This can be found under the REALTOR Standard of Practice Article 1-15. But, you may choose not to divulge the existence of multiple offers. The caveat here is your lawful instruction. It may not always be in your best interest to divulge multiple offers.
The last given, that most sellers seem to overlook when wondering how to handle multiple offers, is we have no control over how the buyers will react to the revelation of multiple offers.
How to Handle Multiple Offers
There is no laws or set guidelines to negotiating and handling multiple offers. Negotiating can be handled many different ways. Here are some common ways on how to handle multiple offers.
Accept an Offer
If you have what you need and expected out of a home sale from one of your offers you can certainly go ahead and accept one. There is no need to go back and try to renegotiate any other offers. It is certainly your prerogative.
Highest and Best Offer
You can go back to all or just some of the buyers and ask for their highest and best offer. This gives everyone a chance to step up and give their final offer and quite possibly you could drive up the price a little more.
Remember highest and best! The best offer may not always be the highest. Maybe there is a cash offer that that is only a few thousand less than your highest offer that has FHA financing with low money down. Or, a home buyer has removed their home inspection contingency and you don’t want to have to go thru the home inspection and possibly renegotiate if problems are found. Or, maybe a buyer is willing to be flexible in closing and that is important to you.
Negotiate One or More Offers
Maybe there is something about one offer that you like. Maybe it is the highest offer but there are some terms you don’t like or the offer you like best based on terms isn’t the highest. You are certainly free to negotiate one or more of the offers while putting the rest on hold.
Reject All the Offers
While multiple offers usually conjur up thoughts of your home going over asking price this is not always the case. You can have multiple offers without one being acceptable. So of course you can reject all of the offers in hand. Bear in mind if you had a slew of showings and multiple offers the buying public has spoken to what your house is worth and you may want to re-consider your pricing strategy.
The above are just some of the common ways a home seller can handle multiple offers. Your listing agent should have years of experience to counsel you on your options and how to best handle multiple offers when confronted with two or more offers.
The UGLY of How to Handle Multiple Offers
So in most cases it is a great position to be in….. wondering how to handle multiple offers. But, there is an ugly side to multiple offers that you should be aware of. There are mistakes that can be made when dealing with multiple offers as a home seller and can leave you empty handed when the dust settles.
Remember as anxious as you are as a home seller so are the home buyers. They have spent months trying to find the perfect home. Weekends and evening of showing after showing. Now they have stepped up and made an offer. Emotions are high. How you handle yourself in the negotiations can make or break you.
Don’t Get Greedy
Its human nature. You receive a slew of offers with in days of listing your home. Your excited and maybe feeling cocky. Now your wondering if you can get more! Treat your buyers honestly, fairly and in a timely manner.
Don’t drag out negotiations or play games to see if you can get even higher offers
Deal with your offers in a timely manner don’t drag it out for days, to see if you can get higher offers. Not always but many time when dealing with multiple offers you have a full price or over full price offer. Buyer’s will get upset and move on and you can be left with no offers if they are feeling your are playing games.
Don’t Go Back to the Well Too Many Times
If you ask for highest and best your buyers have probably already stretched as far as they want to or can go. Don’t push it. If you already have acceptable offers on the table resist the temptation of trying to get more.
Don’t Use Bad or Unacceptable Offers to try and Prop Up a Good Offer
If you are in a multiple offer situation with two offers and one is completely unacceptable and one is good don’t use bad offers to try and bid up an already good offer. This can back fire on you AND LEAVE YOU WITH NOTHING.
What Can Go Wrong With Multiple Offers
Multiple offers are generally a great thing but there are a few downsides you must keep in the back of your mind.
- Bear in mind your house needs to appraise. You may secure a price on your house that is awesome but if a bank is involved there will be an appraisal done to ensure the bank the property is worth what has been agreed to. Sometimes in a multiple offer situation that price can get away from you and you and the buyer have agreed to a purchase price that won’t appraise. While there are ways to dispute an appraisal it is time consuming and can leave you without a deal at the end.
- You have little to no control over your home buyers. This is good to remember in any real estate transaction. You or your listing agent have no control how a buyer will react. I stated this early but thought I would expound a little. Some home buyers hear multiple offers and they retreat in fear of over paying for a house. Or, they do not want to go thru the stress of dealing with multiple offers and being disappointed.
- You will have high buyer elasticity. Let me explain. Put an elastic band between your thumb and forefinger so there is barely slack in the line. The elastic has no elasticity at this point it is almost limp. Now take one side of the band and keep pulling it so it is tight. The minute you let goes it snaps back and the tighter it get the more snap it has. When you push a buyer so hard on terms and conditions they may start to have buyers remorse and any little snafu in the process will send them retreating. Statistically there is a higher percentage of multiple offer deals that fall apart (50%) than single offer deals (10%) as reported by Inman News.
Common Questions about Multiple Offers
- Can I reveal the details of one or more offers to another buyer? Simply put, yes you can. Offers are generally not confidential. Just make sure you treat everyone fairly. In most cases, I would say the best strategy is not to reveal the details of other offers and let buyers naturally offer their best and final. This will usually lead to an offer that is acceptable without scaring another buyer away. Every situation is different and you should definitely discuss this with your listing agent.
- Isn’t revealing multiple offers always in my best interest? Sort of but maybe not. There are times when it is not. One such scenario is in an extreme buyers market you don’t want to scare buyers away. If there is plenty of inventory they may say forget it and move on. Another scenario is don’t use a completely unacceptable offer to try and prop up a good offer. It can backfire on you.
Final Thought on How To Handle Multiple Offers
Being in a multiple offer situation is a good thing!! That’s for sure. But there are some downsides that home sellers need to be aware of when negotiating multiple offers. Work with your listing agent to decide on a strategy to best deal with multiple offers.
I can’t tell you how many times over the years a seller gets caught up in the excitement but then is left with no offers. But that can be avoided.
Remove the emotion and be pragmatic. How you handle yourself will have a direct bearing on the final outcome of your dealing with multiple offers. Of course some home buyers are going to be disappointed but that will be unavoidable. Dealing with your buyers fairly, honestly and openly will go a long way in handling multiple offers with the best possible outcome for you.
Other Real Estate Resources:
- Anita Clark – 5 Negotiating Mistakes Home Sellers Make
- Kyle Hiscock – How to Handle those Low Ball Offers
- Lynn Pineda – Should I Price My Home to Leave Negotiating Room?
- Paul Sian – 8 Negotiating Tips
- David O’Doherty – Is Price Always the Most Important Aspect of Negotiating and Offer?
This post, The Good the Bad and the Ugly of Handling Multiple Offers (Mostly Good), was provided by Kevin Vitali of EXIT Group One Real Estate of Tewksbury MA. If you are thinking of buying or selling, Kevin is happy to answer any of your questions and can be reached at 978-360-0422 at anytime.
Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford