MULTIPLE OFFER LOTTERY -- From the desk of Rod O'Keefe
MULTIPLE OFFER LOTTERY
So - what do you do when you get multiple offers? It can feel, to a Seller, like hitting the real estate lottery!!
After years of personally doing 30-40 multiple offers a year, I am noticing a trend… the Highest price is not always the BEST price! Don’t get me wrong; from a seller’s perspective, this is the ideal selling situation: getting the most money for the home you are selling. But it is important to ensure sellers look beyond that terrific price to determine if the offer with the highest price is actually the best. Having an agent in your corner who is experienced and knowledgeable enough to guide you through the process is key.
Cooler heads prevail:
- The first reaction most sellers have when they get an offer 7%-9% or more above the list price is that they instantly want to accept it, especially if the price is most important to them. Before getting too excited, the critical first step is always ensuring a REVIEW OF ALL THE OFFERS by examining and comparing the terms/conditions, price, and dates regardless of how strong one offer appears, at first glance, over another. It is also equally important to not only understand the background of the buyers but also their agents. Not all buyers meet the criteria to close and not all agents are created equal in terms of their abilities to assess this!
Best case scenario:
It is common in this market, when multiple offers occur, to receive offers WITHOUT CONDITIONS which can be a very powerful motivating factor to a home seller when accepting an offer. A condition-free offer means the moment the seller signs, dates, and returns it to the buyer, the home is SOLD! There is no due diligence process, and/or waiting for financing to be finalized. It also means foregoing the inspection process. The home is sold the moment the signed paperwork is received by the buyer with the seller’s acceptance and then the sold sign goes up. Although price is very important, a subject/condition-free offer saves time and mitigates the emotional roller coaster of selling the home. Excellent agents will strive to bring these types of offers. And they may not always be the highest price offer.
An offer too good to be true:
- Another strategy I am noticing is some agents/buyers will bring a SHOCKINGLY HIGH OFFER that is well above all other offers. The seller is so enraptured with the amazing price that all logic and analysis are trumped by the desire to sign. It is important to control those emotions, as it may be a tactic of the buyer’s agent to get control of the property.
- This strategy can be very effective for the Buyer as it essentially costs them nothing to lock up your home under contract while they get their financing and affairs in order. The downside of this strategy is many Buyers have not done enough advanced preparation with regards to their purchase and it ends up collapsing as they run out of time for their due diligence, or they cannot remove the financing condition because the bank had never approved their financing in the first place.
Looking for red flags:
A good Seller’s Agent will assess not only the Buyer’s agent, bringing the offer (does the agent have a track record of closing many deals?), but also the presentation and details of the offer, and most importantly the supporting paperwork.
Many weaker agents (no track record of success) will have poor preparation and offer presentation and no supporting documentation or details. This is a MASSIVE RED FLAG. By accepting such a high offer only to have it collapse because you are working with a weak agent and unqualified buyer means you may have also lost the better, lower offer with the stronger agent as they have moved on to another home.
The only way to vet this situation is to demand more detail (supporting documentation) from the Buyer’s agent and question any anecdotal information provided. Your Listing Agent should have a candid conversation with you, the homeowner/seller, and provide factual statistics on the Buyer’s agent’s results/track record of success and how that compares to the other agent’s and their offers.
Know what you are looking at:
In the end, it is always the Seller’s decision as to the offer they accept, but keeping a cool head, reviewing all offers and supporting documentation along with identifying the red flags with guidance from their agent will assist Sellers in making the right choice AND more often than not these days help them realize that the HIGHEST PRICE IS NOT ALWAYS BEST!
