The handling of multiple offers can be a tricky subject in Real Estate. Let's just say they are every buyer's agent's nightmare and something that most listing agents look forward to.
I say most because some Realtors try to avoid controversy at all costs and a multiple offer situation can sometimes get contentious.
In my book, having bidding wars on houses excites me. I know my clients will be getting the best deal possible when it happens.
Before getting into the art of handling multiple offers let's 1st discuss some basic parameters of an offer in general. In Massachusetts, all offers whether verbal or written MUST be presented to the seller.
It is not at the listing broker's discretion to determine what is or isn't worth the seller's time to listen to. No matter how ridiculous an offer sounds, it is not up to the listing agent to be the judge of the offer.
It is a violation of the code of ethics to withhold any offers whether verbal or written.
According to the Real Estate Code of ethics, Realtors shall submit offers and counter-offers objectively and as quickly as possible.
There are a few different scenarios in which a multiple offer situation could arise. You could have multiple offers come in around the same time in a given day in which case all of the offers should be presented to the seller at the same time, or you could be in the middle of negotiations with a buyer and suddenly find out you are getting one or more additional offers.
In the 1st scenario, the listing agent should be informing the buyer's agents that there are multiple offers being presented to the seller. The buyer's agents at this point should be instructing their buyer clients to think about what their best offer on the property could potentially be.
One point that should be made clear is that a listing agent is not allowed to reveal the terms of a buyer's offer to another buyer or their agent unless the seller authorizes them to do so in writing.
The code of ethics requires that real estate agents treat prospective buyers honestly and fairly.
A Realtor who reveals the terms and conditions of a competing offer without the seller's authorization to one buyer gives that buyer a distinct advantage over the others which breaches the duty of fairness owed to the other buyers.
In most circumstances, it would be in the seller's best interest to instruct their listing agent to ask all parties to come back with their "best offer."
The seller stands to benefit significantly as none of the buyers has any idea what the other offers are. If the buyers want the home, they will be forced to step up to the plate and possibly pay more than they initially expected to.
Once the seller has received all the bids back, it is to them how they would like to proceed. It is possible that the seller could do one of the following:
- Reject all of the offers. Maybe the price isn't high enough, or the closing date does not work. It is up to the seller's discretion on what is acceptable or not.
- Reject one of the offers and work with the others. Maybe this buyer's financing was too risky no matter how good all the other terms are. In this scenario, the seller could make a counter-offer to one of the other offers.
- Accept one of the offers and reject the others. This is the most common scenario because in most multiple offer situations the seller ends up getting the terms they desire.
The second scenario in which you have already been negotiating an offer and additional offers come in needs a lot more care from the sellers/listing agent, as this is a scenario where emotions can create significant problems.
Let me 1st state emphatically that there does NOT necessarily need to be any special treatment given to the 1st offer. After all, as a seller's agent, it is your fiduciary responsibility to get your seller client the best terms and conditions.
Is it possible that the buyer's agent is going to have steam coming out of his or her ears when this scenario comes up?
It sure is and you better plan for it. There are plenty of Realtors that don't know any better and will give a seller's agent an earful.
You need to stand your ground and calmly remind the other agent what your job entails as a listing broker.
The code of ethics is self-explanatory on this issue. "When acting as listing brokers, Realtors shall continue to submit to the seller all offers and counter-offers until closing or until execution of the contract unless the seller has waived this obligation in writing."
The goal of a listing agent should always be to get the sellers the best terms and conditions. Is it frustrating to be in this situation as a buyer's agent...you bet it is!! Rules are rules though, and this is how the Real Estate game is played.
Multiple offers are always a seller's best friend so to speak. In most circumstances, a seller is going to walk away with more than if the multiple offer situation did not exist. The seller will most likely be in the driver's seat if minor issues come up with inspections as well. The buyer may fear the seller jumping to one of the other buyers who lost out if they raise too many problems.
Looking at the multiple offer situation from a buyer's agent's point of view should be to find out exactly what the seller is expecting for terms and conditions. It should not be assumed that PRICE is going to be the only deciding factor. Maybe the closing date or the amount of money the buyer is financing is just as important to the seller.
Over the years I have been involved with many multiple offers where the seller did not choose the highest bid. An example on a few occasions has been one of the parties being more flexible with extending a closing date so the kids could finish school. As a buyer's agent, you should never lose sight of what could be relevant to the seller.
Besides increasing the price here are a few examples of what the buyer could do to make their offer more attractive.
- Shorten the time to get inspections done.
- Shorten the mortgage contingency date or remove it altogether if the buyer is 100% certain they will get approved.
- Increase the escrow deposit over the usual standard for the area.
A few other thoughts about multiple offer scenarios...Make sure you document everything! As a Massachusetts Realtor for the past thirty-five-plus years, I have learned that being involved in a multiple offer situation can be a highly emotional event.
Buyers and their agents can get really ticked off when they are not the winning bid. It is wise to have your basis covered in the event someone accuses you of wrongdoing!
One last rule and I don't know why you would want to do this but it is not required that you inform other agents of the fact there is more than one offer on a property.
It is at the SELLER'S sole discretion and the choice whether this disclosure takes place. When the seller does give authorization, Realtors shall also disclose whether offers were obtained by the listing agent, another agent in the same company, or a cooperating broker.
Frankly, I love getting multiple offers! I know when this occurs my seller clients are really happy and my list price to sale price ratio has gone up up up.
Other Real Estate articles worth reading:
Preparing your Massachusetts Home for the Spring selling season Preparing a home for sale is a key to being successful, especially in a highly competitive market. Use the advice to have your home looking sharp before you put it up for sale.
How to sell a home for sale by owner Selling a home for sale by owner is not easy especially when you don't know what you are doing. The article offers some timely advice on how you can dramatically increase your chances of selling a home without using a Realtor.
Top ten mistakes to avoid when selling your Massachusetts home When you are selling a house the last thing you want to do is make mistakes. Take a look at some of the best advice you will find regarding selling a home for the most money in the least amount of time.
Thinking of selling a home, condo, or other Real Estate in Ashland, Bellingham, Framingham, Franklin, Grafton, Holliston, Hopedale, Hopkinton, Medway, Mendon, Milford, Southboro, Westboro, Northboro, Northbridge, Shrewsbury, Whitinsville, Bellingham, Upton, Douglas, and Uxbridge? Get in touch I would love to interview for the chance to represent your best interests.