"We have MULTIPLE OFFERS!"
This is a dreaded call from your REALTOR if you are a buyer, but a welcome call if you are a seller.
Murphy's Law says that if anything can get more complicated, it will. Multiple offers is one of those situations where many people may freak out because they don't know how to handle them. So here is a brief guideline on how to deal fairly and smartly with this situation to avoid potential problems:
In some (lucky) situations (more common in "hot" property markets), sellers will have two or more competing offers to consider. They have several ways of dealing with them:
- Accept the "best" offer
- Inform all buyers that there are other offers on the table so they need to put their "best foot forward"
- Counter-offer the best offer while placing the others "on hold"
- Counter-offer the best offer and reject the others
It is important to realize that all decisions about how offers will be presented and dealt with are made by the seller, not by the listing agent. The listing agent only offers suggestions and provides advice.
For example, the seller can give the listing agent authority to disclose to other buyers the existence and details of their best offer, to see if they are willing to "beat it".
I recommend to let all buyers know the existence of multiple offers and to be clear on how they will be handled. It believe it is smart to manage buyers' and Realtors' expectations upfront.
When you are confronted with a situation where you know there are going to be competing bids for the home they want, the buyers need to carefully think:
- How much do they like THIS home? Are there others they would be equally happy with?
- If you get into a multiple contract, competitive bidding or "Dutch Auction" scenario, how far are you willing to go within your capability?
- Do you have an experienced REALTOR representing you?
Ask your REALTOR to try to find out more about the Sellers' motivations and priorities, so you can determine your negotiating strategy and your offers to suit THEIR situation better. Price is not necessarily the sole winning determinant. I have seen sellers take lower offers just because the terms of the contract (for example, a delayed closing) suits the sellers; plans better. There are many terms to play with, including: Price, closing date, seller concessions, repairs, financing, etc.
Every negotiating strategy has advantages and disadvantages: For example, if you decide to lowball your first offer, you may be lucky and get the property for a bargain price. But you could upset the sellers and give an easy advantage to competing offers, EVEN IF YOU WERE ULTIMATELY WILLING to pay more for the home. Sellers react differently, what may have worked in a previous instance may not work now...
All agents are required to follow lawful, ethical instructions from their clients. In South Carolina, a listing agent is allowed to disclose the content of the competing offers to all the buyers, provided their client has allowed them to do so. If you are buying, you may as well ask the question...at least you may be able to know where you stand vis-a-vis the other offers...
Negotiating multiple offers can become an exercise similar to poker playing. It is sometimes impossible to determine if what the other party is saying is accurate, or just bluffing. So, KEEP YOUR OBJECTIVE IN MIND and do not get sucked into an ego war with the other parties. Next time you get that call from your REALTOR telling you there are multiple offers, don't panic - take advantage of the situation and play cool...