Multiple Offer Situation
If you’re a buyer in today’s market, you may have experienced the frustrating situation of finally finding the house that meets your wants and needs, putting together your documents and making the offer, only to receive a reply indicating that the seller has received multiple offers. With limited inventory and an over-supply of real estate buyers in Central Florida, this happens in more cases than not. As if negotiations aren’t enough, entering a bid war with other buyers adds another level of complexity and aggravation to the process. The key to success is getting noticed over the other buyers, giving the seller what they desire and getting what you want.
Here’s what you NEED to know to make a fair offer outshine the rest:
How sellers typically deal with multiple offers:
When faced with the highly desired problem of having multiple buyers compete for the opportunity to buy a property listed for sale, sellers can do any of the following at their sole discretion or with counsel from their REALTOR®:
- Issue a multiple offer declaration to the buyers that have submitted offers and to any new buyers that are considering making an offer. Typically, the seller sets a “Highest and Best” deadline for which buyers have the opportunity to provide an improved offer or submit their first offer by. After the deadline, the seller will sift through the offers and may choose one of the following options:
- Accept one of the offers ‘as is’ and move the listing to a ‘pending’ status.
- Reject all offers and continue marketing the property. There is a slight caveat to this. Refusing to sell to a buyer when all terms listed in the MLS have been met or exceeded may be a violation of the MLS rules.
- Choose one offer and attempt to negotiate the terms of that offer with a counter-offer.
- The seller may also decide to for-go the multiple offer/highest and best scenario and go right to one of their options of Accept, Reject or Negotiate.
- Sellers MAY NOT:
- Make counter-offers to more than one buyer at a time. If more than one buyer accepts, the seller will have to breech at least one contract in order to perform on another.
- If the property is listed with the MLS, conduct an auction unless the listing provides disclosure that they intend to do so.
How buyers can spruce up their offers:
Price increases get the most attention when it comes to offers, but there are ways to mitigate the risk of over-paying as buyers compete with others. A well-written escalation clause will incrementally increase a buyer’s purchase price when in direct competition with another offer. The buyer can set the base price, increment value and the maximum purchase price. The seller is required to provide proof of the existence of any competing offer that engages the escalation.
Price, however, is not the only negotiable item, though it may be a daunting task to circumvent the impact of net value. Very often buyers, sellers and even REALTORS© get caught thinking ‘inside the box’ and forget that price is only one of many items that have value. Using non-price-related tools can minimize other offers and put your offer in first place. Here are some terms and conditions worth considering:
- Earnest Money (Initial Deposit) – A larger deposit may send a signal that a buyer is more motivated. Having some “skin in the game” often makes the seller feel more comfortable that a buyer won’t walk away from their obligation to perform on the purchase agreement.
- Financing vs Cash – Cash transactions have a much higher probability that they’ll reach the closing table, since there’s no contingency (escape mechanism) for the buyer to be released should a loan not be approved. Cash offers are often more desired and considered at lower purchase prices in contrast to financed offers.
- Closing Date – Exterior forces often drive buyer and seller motivation to close a property within a certain time frame. This item is tricky, since the seller rarely publicly declares whether a sooner, rather than later close is either desirable or not.
- Inspection Period – A waiver of the buyer’s right to cancel a sale based upon a satisfactory property inspect may NOT be advisable, but it’ll probably get the attention of the seller. An alternative to a complete waiver might be to shorten the period of days in which the buyer reserves the right to inspect and cancel.
- Appraisal Contingency – If the purchase will be financed, it’s highly likely that an appraisal will be required by the lender. If the appraised property value isn’t as high as the purchase price, the buyer may have a right to cancel the purchase or cover the difference with personal funds. A waiver of this contingency would mean that a buyer would be REQUIRED to purchase the property even if it didn’t appraise as high as the purchase price. It can only be a suggestion if the buyer has the liquid assets to cover any potential short and is willing to do so.
We also explain other real estate terms to help make the process of home buying or selling easier. Take a look.
While there’s no single avenue for buyers (overshadowed by other buyers) to get the attention of sellers, there are lots of ways to increase value without increasing price, but very often price is the only term negotiated. Just by being unique, a well-constructed offer stands to gain initial consideration over others. Put yourself in the place of a seller and examine the things you think might be important to you. While you probably won’t understand all of the concerns of any particular seller, you might nail down some basics and it might end up serving you in putting that highly desired home under contract.
Some of the more common negotiable terms and conditions of real estate purchase contracts are listed here, but it can’t possibly address all motivating factors that buyers and sellers have, so it helps to have insight, experience and flexibility to think outside the box when negotiating with sellers and competing with other buyers. Above all, caution should be used in reserving or waiving contractual rights and legal counsel should be retained if there’s any question about the impact of making such choices. At the very least, work with an experienced REALTOR® who places your interests first.