Until inventory meets demand, it is common to have multiple offers in this seller’s market. As a seller, working with an experienced agent with a proven track record of successful negotiations is very important. There are many different approaches to negotiating offers when multiple buyers are bidding on your home, and in this post I will cover a few of them. The agents at River Valley Realty can review the advantages and disadvantages of each strategy for your particular negotiating scenario.
– Accept the best offer Received: The “Best Offer” strategy is the easiest way to handle multiple offers, but might not get you the highest price. Once it is determined that there will be multiple offers, your agent will set a deadline for review. You and your agent will review the offers in front of you, considering not only price but also issues such as terms, the amount of money down, settlement date, contingencies, and whether or not the buyer is pre-approved for a mortgage or paying cash. After considering all aspects of each offer, choose the one that best suits your needs (which may or may not be the highest price), thank the others, and continue on your way to settlement.
-Counter one offer and hold the rest: If the “best” offer is not quite where you want it, you may counter that offer and your agent will inform the other buyers that you are considering another offer and if that one does not work out, then you will look at all subsequent offers. The plus side is that you have an opportunity to improve your strongest offer. However, Buyers often do not like to be kept waiting for a response, so they might withdraw the offer. And, if the “best” offer does not meet your terms, you might have nothing to fall back on.
– Best and Final to all/selected offers: In this option, your agent will go back to all or some of the other offers and ask potential buyers to come back with their best offer possible. If this strategy is implemented, the seller must understand that many buyers will either “hold” at their current offer, or feel that they have already put the best foot forward, lose confidence and walk away from the deal. If that happens to more than one buyer, you can wind up with no offers at all.
–Other considerations: terms, closing date, financing and contingencies It is important to carefully consider the terms of the offer, beyond price. Too often we see buyers and sellers caught up in a price war, without enough attention and negotiation placed on the other terms of the contract.
Is the closing date in line for the seller’s next move? If it is too soon or too far in the future, costs can be incurred by the seller…so negotiate that up front. Is there a home sale contingency and if so has the status of that sale been fully vetted? If it’s a cash offer, has the proof of funds been verified? Do the buyer’s financial and preapprovals coordinate, and have they been verified? Has the issue of an appraisal deficit been appropriately addressed, if it is not a cash transaction? The buyer and seller can agree on a price, but unless that buyer’s lender has an appraisal verifying the sale amount, the deal can run into issues at appraisal time. An Escalation clause is a tool that is often used to help a buyer prevail in a multiple offer situation. This is specified premium that the buyer agrees to pay, above any offer received. A good seller’s agent understands that these must be carefully reviewed in conjunction with the lending ratio and anticipated approval, and any potential deficits addressed before an offer is accepted. Finally, the inspection contingencies that the buyers select should be compared to those in the other offers. While most prudent buyers are having inspections, some are willing to limit the scope or potential requests for repairs.
In all aspects of a multi offer negotiation, treating all parties involved as fairly as possible is the right, and ethical, thing to do. There can only be one “winner” of that dream house, so it’s important to stay in close communication to all the buyers agents. All parties need to present and review all offers and counteroffers promptly, and operate in good faith. If everything is handled in an equitable manner, with good communication, the seller should be able to work with their agent to negotiate a deal that is in their best interest.
For a further discussion regarding negotiating multiple offers, one of our experienced local agents would welcome the opportunity to meet with you. Please call owner Kim Ward Bacso at 609-397-3007 or email her at Kim@RiverValleyRealtyNJ.com to discuss your real estate goals so that she can match you with the best agent to help you reach them!