The market has made some significant changes in the past year. In some areas, we’ve seen multiple offers on properties that have been on the market for a day or less. If you have never been involved in a multiple offer situation or had to deal with a counter offer, here are a few tips on how to deal with them.
So what happens when there are multiple offers? How do sellers deal with this and what can buyers expect?
Most of the time one offer does not stand out so clearly that a seller will just accept it. The seller will give the other offers that are close an opportunity to better their offer, so they can get the best price and terms. This is where a reputable broker can be of value. Multiple counter offers need to be handled with professionalism that makes the experience fair yet competitive.
I said price and terms because many times price is not the only or most important factor. Frequently when there are multiple offers one buyer may have the best price but not acceptable terms (e.g. a very long escrow or the purchase being contingent on the sale of their home); whereas another buyer may have desirable terms (e.g. all cash and a 15 day escrow) but the price is low.
So if the seller wants to counter both offers, what is the process? Counter offer A will say something like – “will accept offer at the stated price, with a thirty day escrow” and Counter offer B will say something like “terms are acceptable, with the price of XXX.” Note that the counter offers don’t have to be the same.
This is a simple example; there could easily be more offers the seller would counter. So with multiple counter offers how does the seller choose one?
In most states a system has been created to accommodate multiple offers. Two things are typically done:
- A paragraph is added that reads MULTIPLE COUNTER OFFERS: Seller is making a counter offer(s) to another prospective buyer(s) on terms that may or may not be the same as this counter offer. Acceptance of this Counter Offer by Buyer shall not be binding unless and until it is subsequently re-signed by seller.
- Multiple Counter offer Signature Line – this allows the seller to accept the counter offer. The seller has made multiple counter offers but none are binding until the seller signs the second signature line.
- At the writing of the article a new form has been developed and released in CA just to handle multiple offers, so look for other states to follow.
Now using these systems to handle counter offers and multiple offers can also back fire. It is a risk. Some buyers will say, “I don’t want to get into a bidding war,” and will drop out altogether.
Remember, it’s the Agent/Broker’s responsibility to get their client the best and highest offer for the property.
As an investor, you try to find the best deal and not get into a bidding war. That takes discipline and setting boundaries. One of the best pieces of advice I was ever given is to simply say “That’s all I can afford,” and be willing to walk away. There is another deal out there, don’t buy into the emotional.