How To Handle Multiple Offers?
And why on earth am I talking about this in a "buyers' market"?
Well, as it turns out, it is not so much a "buyers' market" in certain segments of our local real estate market. Specifically the lower priced home and short sale home segments in each area have seen a lot of activity in the last six months, the former due to the First Time Homebuyer Tax Credit, the latter to the incredible deals that short sale prices seem to offer. The availability of these kind of homes in good shape has dwindled accordingly. And with this reduction in inventory come (you guessed it!) multiple offers, as buyers compete for the few good homes available in their price range...
In the last month I have seen many multiple offers. Agents have different ways on handling multiple offers. I advocate full transparency, so everyone knows where they stand and how the offers will be handled. Managing the expectations of all involved parties is the most important skill required. First of all, if you are the listing agent and you know there will be multiple offers it is essential to communicate immediately with all the buyers' agents and let them know this fact, so they can amend their offers accordingly. Can you disclose the particulars of each offer to other buyers? In SC, yes, but only with your sellers express permission to do so.
Many multiple offer scenarios end up in a "dutch auction" situation, where the seller plays offers against each other. While this usually results in a higher than expected price, it is a dangerous strategy because in this market buyers hate having to compete for homes, and may be turned off from buying this particular home.
If the listing agent knows many offers will be received, the best approach would be to say that all offers will be looked at a certain date and time, and the seller will negotiate with the highest bidder first, and then, if terms are not agreed, go down the list.
As a buyer, your best shot to win a multiple offer situation is to include an ESCALATION clause in your offer, which increases your offer by a certain amount over any other verifiable offer, up to a maximum price. This way you will not have to waste money bidding excessively above other offers, and it will still give you the chance to win by paying just a little more than other competitors within your price range.
Multiple offers are tricky - they usually please no one (except the seller). But they are coming back - better be prepared and handle them smartly and professionally! Choose an experienced Realtor who is not fazed by multiple offer situations and knows how to explain the different courses of action to you.
Please contact us if you have any questions or comments.