Your home has been priced right since Day One and marketed well enough to attract dozens of people to visit the property. Now the offers are coming in. The seller is experiencing an ideal situation – choice!
As we stated in the previous blog post, an offer can be accepted straight away, rejected, or a counteroffer with specific terms favorable to the seller can be returned to the buyer. But now there are multiple offers seeking to buy your home. What do you do then?
Your listing agent can explain various negotiating strategies for you to consider. Essentially, there are five choices for the seller:
- Accept the “best” offer, with “best” defined by the seller (not always highest price);
- Inform all buyers that other offers are “on the table” and invite them to make their best offer;
- Counter one offer while putting the others aside awaiting a decision on your counteroffer;
- Counter one offer and reject the others; or,
- Reject all offers.
To be sure, each of these approaches has advantages and disadvantages. For example, patience may result in an even better offer from a bidder after this first set of offers; inviting buyers to make their “best” offers may produce an offer (or offers) better than those “on the table;” or the situation may discourage buyers who feel they’ve already made a fair offer and prompt them to move on.
There are dozens of permutations in a multiple-offer situation – particularly when it comes to examining the various contingency clauses – and trying to dive too much deeper here could lead to book-length reading. (No thanks!) Instead, let your listing agent sit with you and review – without prejudice – each offer to weigh their benefits. Ultimately, the decision is yours.
In this competitive scenario, sellers often ask their listing agent to invite buyers to make the “highest and best” offer, including allowing buyers to submit a second offer that overrides the first. Listing agents will attempt to create a fair and balanced “playing field” for all participants in the bidding process. They can work with their client to agree on whether to share all competing offers with all competing buyers, thus incentivizing multiple offers or, the alternative, to withhold the details of any offers and encouraging buyers to use their smarts and imagination to create the terms of a winning bid.
When it comes to making decisions on which buyer to work with, there are times when more than one offer provides for similar or equal net proceeds. That’s when the seller will likely look at which of those offers align best with his/her timeline to leave the home. It’s also common to hear stories of how the buyer’s personal letter made the difference, explaining, for example, how much they loved the home or how they intend to continue planting in the same garden the sellers enjoyed tending to for many years.
Highest-and-best situations can often make for disgruntled buyers but, as sellers, you have good reason to use this method. The biggest reason is that you want to inform all buyers of multiple offers and give them a chance to raise their bid. This method of selling a home is usually the fairest way to handle multi-offers and, honestly, homeowners have every right to try to maximize their profit (or cut their losses) and minimize risks.
One risk to this best/highest method is that it can create a bidding war that raises the offer beyond the home’s market value. The seller may accept the highest offer but see the deal fall through when the lender appraises the property for less than the offered amount and the buyer cannot make up the difference as part of the down payment.
Bullet point No. 3 – which hints at the possibility of countering an offer that includes one or more contingencies – raises another potential scenario. Some buyers are so interested in a particular home that they are willing to make a backup offer, a bid that is contingent on the failure of the sale with buyer No. 1. A listing agent is required to share all offers to the seller, even when he/she is involved in finalizing another offer. An offer from buyer No. 2 can be accepted and placed in the back-up position only if the seller includes a so-called backup contingency clause as part of his/her counter response to Buyer No. 1. (Sellers should never attempt to breach one offer – it’s a contract, signed by all parties – in favor of another buyer unless and until the first buyer has failed to meet his/her obligations in the deal.)
To be clear, a new (or counter) offer overrides the previous bid. A buyer’s terms in an offer are considered accepted by the seller when he/she returns a signed counteroffer except for portions of the counter that are different from the original offer.
Finally, it’s okay for a seller to walk away from an offer. Sometimes parties aren’t able to come to an agreement. It’s disappointing but we can learn from that experience. And, in Seattle’s sellers’ market, there are usually back-up offers in the queue or more buyers available to see the home and make a bid.