Multiple Offers, Part 1
Originally appeared in Hills Publications, June 12, 1998
Competitive offers are common in this sizzling seller’s market. How to deal with them fairly is often misunderstood by the public and real estate agents alike. A poorly handled multiple offer situation can lead to a buyer failing to get the home he wants. It may also cost a seller thousands of dollars in unrealized sales price.
Listings agents are in control
Few sellers have sufficient previous experience responding to multiple offers. This is why the seller’s (listing) agent almost always directs how and when offers will be presented.
Prior to signing a listing, a seller should interview a number of Realtors and inquire about their background. Ask if they were in the business in this area during the last seller’s market of the late1980s; how many times they have represented a seller who had multiple offers; what upsets occurred on the part of buyers or agents who were unsuccessful in their bids; what pricing strategy would they recommend; and how they would schedule the presentation date.
When to hear offers
In this frenetic market, it often makes sense for a seller with a desirable home to pre-set a date for hearing offers. It is only in this kind of market that a buyer may be forced to wait to present an offer.
The date a seller chooses should be one that gives buyers and their agents sufficient time to see the home and write a contract. This may seem like an obvious statement; however, there have been a number of new listings this year that had a Sunday open house (the first time buyers and agents could view the property), a broker’s tour on Monday, and offers scheduled for Wednesday. In effect, the property was exposed to the market for only three days. Such a short window is insufficient. It defeats the seller’s purpose of eliciting the best offer possible.
Pick a presentation date between five and seven days after the house comes on the market. Some sellers hold off for up to ten days, but too long a wait can turn someone who is excited about buying your home into one who buys another.
More or fewer offers than expected
When the appointed day and time for presenting offers finally arrives, it is not unusual for the number of actual offers to be different than anticipated.
As the days to presentation count down, buyers have their agents call the listing agent to ask how many offers have been written. Since many buyers are holding back from admitting they are writing an offer, the listing agent cannot be sure. This leaves the inquiring agent without a vital bit of information to help plan his buyer’s strategy.
In one scenario, a buyer’s agent arrives for presentation thinking his is the only offer. At the last minute, another bid materializes. Because there is now competition, the first buyer must be given the opportunity to improve his offer, if he so chooses, before the seller makes a final decision. Not to do so would be unfair to both the buyer and seller.
Another situation would be where a buyer wrote a contract with prior knowledge that there was at least one other bid. Before presentation, the other buyer or buyers drop out. The listing agent is obligated to disclose this. As the buyer was operating in the context of competition, it is possible he may withdraw completely if not given the opportunity to adjust his offer accordingly.
Finally, there is the case where two or more offers have been written and other, expected bids did not materialize. These contracts were written with the idea they were in competition with many other offers, not just a few. Again, an agent’s approach may change given the new circumstances.
It is the unexpected that can cause acrimony in multiple offer transactions. This is where an agent’s experience and common sense are vital.
How to set up the multiple presentation
By the day of presentation, the listing agent will have heard from agents who have written offers. He will usually schedule them twenty to thirty minutes apart. Each buyer’s agent presents his offer to the seller and listing agent privately. The order of presentation is not significant. An unsatisfactory offer will not be improved by when it was presented, nor will a strong one be weakened.
A number of buyers have told me they would prefer to personally sit around a table with all other competing buyers and explain why the seller should accept their offer. This is not done for the same reasons agents with competing contracts do not present their offers in front of each other. Each offer deserves undivided attention. Any other way is inappropriate and unprofessional.
Final Thoughts
Buyers and sellers are entitled to have multiple offers handled in an above-board and professional manner. Unfortunately, this is not always the case. Compounding the problem, some sellers allow their agent to make multiple counteroffers. This and other issues will be discussed in part two.
Related Articles:
Multiple Offers, Part 2
Hot Market Gambits
Emotional Ping-Pong