When the market is hot, an attractive abode is a sought-after commodity. When an area’s buyers are all itching to get into their next dream home, sellers can usually expect to receive more than one offer very quickly after their listing is posted on a multiple listing service (MLS).
How can you, as an agent, help your buyers or sellers navigate these often stressful situations? Read on for how real estate professionals can guide their clients through multiple offers, bidding wars and more.
What Listing Agents Need To Know
A seller who has received multiple offers on their home is in a great position. However, sorting through all those offers and figuring out which one is the best overall can feel overwhelming and confusing for sellers. Here’s how their agents can help them through the process to choose the best deal.
Compare The Offers
Organize the offers for your sellers in a way that makes it easy for them to see what each one includes so they can easily and efficiently weigh the pros and cons of each.
“Sellers would be well-assisted by having a succinct comparison chart prepared so the salient differences between offers are clear,” said Michael Edlen, a REALTOR®and associate broker with Coldwell Banker in Los Angeles.
By doing this, it’ll quickly become clear which offers are the best and most competitive and which ones are an easy “no.”
“As a seller, it is important to prioritize offers that are preapproved for a loan, will give you time to move, are flexible and have few or no contingencies,” said Ben Mizes, Co-Founder and CEO of Clever, a company that pairs home buyers and sellers with real estate agents who have lower commission rates.
Consider The Seller’s Needs
Of course, what makes a good offer depends on what your seller needs from the home sale.
Rebecca Green, a Portland-based real estate broker with Hasson Company, Realtors®, said that there are “so many different pieces to every puzzle. Every transaction is unique, and each seller has a different priority and different needs. Price is not the only consideration.”
Are they looking to sell as quickly as possible or can they afford to wait a little bit to make sure they’re getting the best offer? Be sure to discuss with your client what their hopes are for the sale and what their ideal timeline looks like.
“The close date and occupancy date may matter to the seller as well and may make a financial difference. A lower offer with a quicker closing could net the seller more money,” Green said.
The Highest Offer Isn’t Always The Best Offer
While it’s usually a priority for sellers to make as much money as they can on the sale of their home, it’s not necessarily the top priority for every seller.
“The best offer is the one that meets the goal of the seller. Is the goal to sell as soon as possible? Is it to get the highest offer?” said Candice Williams, a Texas-based real estate agent with RE/MAX.
Listing agents should take into consideration what the seller wants out of the home sale, but they should also use their expertise to help the seller think about the aspects of the offer that they might not have thought about yet.
“When I represent the sellers, I often counsel them that the highest priced offer is not always the best offer. Terms of a contract, buyer qualifications and the buyer’s motivation are equally as important. A good offer is the sum of all parts of the contract,” Green said.
A high offer means nothing if the buyer can’t follow through on it. You want to evaluate the offers based on the likelihood that they’ll close. And if an otherwise attractive offer is lower than you’d like, see if there’s room for negotiation.
“The highest offer is often not the best one! Often one of the lowest turns out to be the highest after counter offers. Also, the quality or financial strength of one prospective buyer may be worth more than a small dollar differential of another,” Edlen said.
Don’t Rely On Love Letters
In situations with multiple offers, sellers will sometimes receive letters from prospective buyers hoping to stand out. Though buyer “love letters” are somewhat commonplace, especially in hot markets, the reality is that you could be violating fair housing laws by using them to judge offers.
For those who might be unfamiliar, buyers sometimes will send letters and even pictures of their family to the seller of the house they want to purchase. These letters might try to appeal to the seller’s sense of attachment to their home and their desire to see a home they spent years living in go to someone who will also care about the home.
While a nice sentiment, it’s illegal to refuse to sell a house to someone based on certain protected classes. Regardless of their intentions, your seller could be seen as doing just that if their decision is based on any letters or pictures they’ve received.
What Buyer’s Agents Need To Know
On the other side of the negotiations, there are things that buyer’s agents can do when they know they’re helping a client make an offer on a house that has (or will have) multiple bids.
Help Them Keep It In Perspective
As the real estate agent, you’re the professional, objective voice in what tends to be a very emotional process. While you obviously want to help your client get into a home that they love and are going to be happy with, you also want to help them avoid getting so caught up in the sense of competition that they do something they sorely regret down the road. Such examples include offering more than they can comfortably afford or forgoing vital contingencies just so they can land the deal.
“When dealing with a buyer situation with multiple bidders, agents must remind their buyers to stay within their means and remember that their home is an investment. Many times the home buying process becomes very emotional, so it’s very common that buyer get into a mentality that they can’t lose a certain house. This leads to overpaying for a home, agreeing to terms you wouldn’t otherwise agree to and taking more risk in general,” said Donovan Reynolds, an Atlanta-based licensed real estate agent with Coldwell Banker.
Put Your Best Foot Forward
Once your buyer is prepared to make an offer, make sure everything on their end is prepared and ready to go. The last thing you want is for a seller to think that an offer was made haphazardly or that the hopeful buyer is disorganized or ill-prepared.
Ensure that the buyer has a strong preapproval from a mortgage lender, and look for other ways you can help streamline the process for both parties like having a home inspection already set up.
“When representing the buyer in a multiple offer situation, I always suggest shortening the inspection contingency period and often preschedule inspections so we can communicate actual inspection dates when we submit the offer,” Green said.
Cash Is (Usually) King
You’ve probably heard it repeated ad nauseum by now: If a buyer has the means, cash offers are by far the strongest. But not everybody has that kind of money just lying around.
Unfortunately for those who plan to use financing to purchase a home, all-cash buyers have the advantage when a home has multiple offers on it. However, while it can be difficult to beat a cash offer, it’s not unheard of.
Your goal is to help your buyer make their offer as attractive, organized and streamlined as possible.
Discuss waiving certain contingencies, though you should be careful about encouraging them to waive important ones that could cost them money down the line, like forgoing an inspection.
If it’s possible for them to do so, have the buyer consider making a higher offer. Additionally, see if you can find out what some of the seller’s goals are and position your offer to meet those goals. Do they need extra time in the home after closing? Do they need to close on the home as soon as possible? Communicate to the seller that your buyer is flexible and willing to work to meet the seller’s needs.
Above all else, set proper expectations with your client. Cash offers are tough to beat. Sometimes, no matter how attractive your offer is, it can’t beat the strength of cash.
Be Careful What You Ask For
When competing against multiple offers, it’s important to be careful while treading the line between getting your buyer what they want and asking for too much (therefore, scaring the seller away).
“It is very important for the buyer in this situation to limit the extras they ask for from the buyers – don’t ask for seller contribution towards closing cost, don’t ask for an allowance such as a paint allowance or carpet allowance and keep the number of days in option period to inspect property to the minimum,” Williams said.
Dealing with multiple offers, whether you’re on the seller’s or buyer’s side, can require some smart maneuvering for both parties to get what they want. By helping your clients stay organized and prioritizing their goals, you increase the odds that they’re able to get what they want, whether that’s making a nice profit from the sale of their home or having their offer accepted on the home of their dreams.
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