How to Handle Multiple Offers in Your Real Estate Transaction
I know you’re probably thinking, “multiple offers”? Really? In this real estate market? It’s not as rare as you may think. In this market there are many bank owned foreclosures and motivated sellers who have priced homes to sell. In some cases pricing is so low, the property generates multiple offers and parties negotiating up. This can result in a higher sale price than pricing the property high and negotiating down.
Sellers: What do you do if you’re on the selling side of a multiple offer situation? Whatever you do, do not pick the best offer and negotiate from there. To get top dollar out of your buyers, do a multiple counter offer and negotiate with all the offers (or at least the best 3 if there’s a bunch). One strategy is to counter with “submit your highest and best offer” to all the potential buyers. Or you could counter with whatever terms and price you think will generate a good response. The key here is to spur competition among buyers and to generate a counter offer back from the buyer that really is their best terms and top dollar. Once you receive counter offers back from the buyers, you can then select one offer to work with. You can either accept at this point or try to negotiate a little further.
Buyers: How do you handle things if you’re on the buying side of a multiple offer situation? The most important thing is to be sensible and not let emotions drive your reaction. Many buyers get excited by the competition and end up overpaying. Decide on your maximum price right away and hold yourself to it. There’s a house for sale on every corner and you’ll find another one if this one doesn’t work out. Play the seller’s game, give them a counter offer, but don’t go above your maximum price. You may want to consider bettering your terms other than price. Sometimes a quick closing and minimal contingencies will win over price. For example; the seller may take $150,000 with a closing in 30 days over $155,000 with a closing in 60 days. So make your terms as desirable as possible to the seller.
Caution: One thing to be aware of: with a multiple counter offer the contract is not binding upon the buyer’s approval. The multiple counter offer must go back to the seller for the their acceptance. It’s possible multiple buyers could approve the same price and terms and the seller has to decide which one to accept. This is very different from a standard counter offer, which is binding upon the responding parties acceptance.
Of course, it’s always best to consult a real estate professional to make sure your negotiations and paperwork are handled properly from a legal prospective. Good luck with your offers, and remember to keep it a business transaction not an emotional decision.
Note: this information applies to the State of Wisconsin. Other states may have different forms or methods.