Multiple Offers: Best Practices for Realtors9/21/2020
Locally, we are currently experiencing a “Seller’s Market”. This occurs when the inventory (houses available for sale) is less than 6-month’s worth of demand. There are more buyers looking to purchase homes in the next six months than there will be homes available for sale.
One of the common characteristics of a strong seller’s market is the receipt of multiple offers. Sellers can receive many offers on their listing and find themselves with the task of choosing the best. When multiple offers are in play and only one is accepted, it is natural to expect that someone is going to be disappointed. Problems arise when there are unmet expectations. The best way to smooth the process for competing buyers, their agents and the seller, is to set very clear expectations up front. Here are 5 things to remember when setting these expectations:
- Develop a very clear process for handling multiple offers with the seller up front. Listing agents should discuss the possibility of multiple offers with the seller at the time of listing and agree in writing on exactly how they will be handled. RE/MAX Perrett Associates has developed a template that agents can use to accomplish this. This document can be used as an addendum to the listing agreement.
- Once a plan is in place and expectations are set, COMMUNICATE. By using the marketing remarks in the on-line listing and the showing instructions to agents, listing agents can clearly communicate the seller’s plan for receiving and responding to multiple offers.
- When creating a plan with the seller, try to answer these questions:
- How long will the seller collect offers before making a decision?
- Will all buyers who submit offers be notified that there are multiple offers and given a chance to increase their offer before a deadline?
- How long will seller take to make a decision?
- What will be the process for offers not accepted? Will they be held as backup offers?
- Stick to the plan – Having the seller agree to the plan in writing encourages them to adhere to the plan when things get hectic. If the seller has agreed to wait 10 days before responding to any offers and then gets a great offer the first day, they may want to change their mind and jump on the offer in hand. Sellers have a right to change their mind, but they will be much more thoughtful in their decisions when they have already carefully considered the possibilities and have a plan in place. If the seller does decide to change the plan mid-stream, re-visit item 2!
- Make sure buyers are aware of all of their options – This step is for buyer agents. Buyers can get very creative in working to be the “winning” bidder in a multiple offer situation. A buyer’s agent should be aware of all the tools at the buyer’s disposal including, but not limited to, escalation clauses, waiving of inspections, financing type, paying closing costs, etc. For more information on escalation clauses, see our post from June 8 of this year.
The common thread for all parties of making this process as clean and pain-free as possible is communication. Listing agents should communicate early with sellers about the process and possibilities. Buying agents should communicate early with buyers on their options. Listing and buying agents should communicate clearly and in a timely manner with offers, terms, changes, questions, etc. Setting expectations early and communicating them clearly are the key to navigating this wonderfully hectic seller’s market.