Many offers on your home are exhilarating and intimidating at the same time. Consider, if you will, a scenario where you are a prime negotiator in an environment where you require to choose from several offers available. There are strengths and weaknesses associated with each of them. How could you ensure you were making the right choice for your future? It would be prudent to appreciate the mechanics in handling multiple bids. Are you ready for this pivotal moment in your career? Let me walk you through the strategies and considerations that will help you negotiate and walk your way to the best outcome with confidence. We will find that dream job together, because it’s there.
Handling Multiple Offers
Your Hopefully—if you have many buyers put in offers on your home, your home is in a demand place. Usually, such happens when your home is in the right place, the pricing is right, and at the right time of the year when real estate is at the height of business. Of course, the price, terms, the source of financing, and the proposed closing dates are going to be somewhat different for each offer
The Bidding War Phenomenon
A real estate bidding war is an event wherein interested buyers of a property compete with one another through increasing bids. This competitive market circumstance can be very advantageous to the seller in the sense that the final price to sell his or her property may increase higher than its original asking price. To use this improved interest yet avoid the dangers associated with it, a person needs to manage a bidding war with understanding and strategy.
Dynamics of a Bidding War
Increased Market Value
The ability to sell your house for a price higher than it is advertised for is one of the biggest advantages of a bidding war. Potential customers perceive your home as being worth more because each bid they places tends to be higher than the previous one.
Quick Decision-making
This customer requirement drives the buyer to try to make the best offer in the shortest time, and it usually pushes the bid wars to take off very fast. Sometimes the rapid take-off can force the buyer to make higher bids than they had intended.
Emotional Investment
The buyers are also emotionally attached to the property, which may make them stretch their wallets or provide conditional offers only to capture the property from the competition. A seller can thus use this emotional factor to his or her advantage by providing competitive conditions.
They can make their offers more attractive to sellers by allowing flexible closing dates or simply doing away with some conditions such as an appraisal of the property or an inspection of the property. As they could be very different, these conditions must be taken seriously in addition to the price that is being paid.
Procedure for Handling Multiple Offers
When you get multiple offers, deal in a structured way so that you will be able to select the offer most acceptable to your financial and other expectations of sale.
Weigh Each Offer Carefully
Take some time to review each offer carefully. In addition to the amount offered, consider contingencies, proposed closing dates and any requests of the buyer. Knowing as much as possible about an offer allows for a more informed determination of an offer’s overall feasibility as well as its attractiveness.
Check for Buyer Pre-approval
Determine if each potential purchaser is pre-approved by their financing institution. Individuals who are pre-approved have a higher probability of succeeding in the sale because they are less likely to have financing problems that may delay or prevent the purchase. No hang-ups in the deal require funds and fiscal fitness verification.
Beware of Contingencies
Contingencies are conditions that must be satisfied for the sale to take place or occur. Think about the contingencies in every offer that exist, be it financing, appraisal, or inspection. The fewer the number of contingencies in an offer, the less risk there is in having a transaction fail or not close on time.
Look over Proposed Closing Dates
Check your personal timetable against the closing dates that each offer suggests. If you need to move fast, a higher offer with a later closing date may seem more attractive. If your moving situation requires more time to prepare for your relocation, a later closing date may be better. Getting the closing date to suit your requirements might make the selling process go more quickly.
Negotiate Counteroffers
If none of the initial bids are quite up to par with your expectations, consider negotiating counteroffers with the most potential buyer. To come to a mutually agreeable agreement, this process of negotiation may be needed to adjust the price or the conditions or yield to some of their requests. Be open to constructive negotiation to maximize the conditions for your sale.
Choosing the Best Offer
Deciding on the best offer if you have several on your property requires careful consideration of several key factors to ensure that things go as smoothly and as problem-free as possible.
Offer Price
While this is usually the first, and oftentimes the most considered, factor, looking beyond the money and considering the buyer’s overall financial position is integral. Following is a detailed approach to analyzing the offer price:
Market Comparisons
Compare each offer to recent local comparable sales. This can help you determine whether the price offered is in line with your home’s current market value. Your realtor can analyze each offer’s competitiveness for you by comparing it with comps.
Financial Standing
See if the customer will be able to afford the price they are charged for. Sometimes a buyer will give a large bid but have no financing behind them. This may risk or even elongate the closing process. Request for proof of finances or a mortgage pre-approval to be certain they can afford it.
Appraisal Contingency
See if the buyer has added an appraisal contingency. Making their offer even more binding, a “no-contingency” offer means they will continue to buy despite an appraisal that comes back lower than the price they offered.
Buyer Financial Strength
It’s essential to know the financial status of each buyer to reduce the possibility that financing problems will result in the buyer being unable to complete the purchase:
Pre-approval vs. Pre-qualification
Pre-approval is however weighted more heavily since it involves a closer to proper financial analysis by a lender since both do signal the buyer willingness to get financing. A buyer who is pre-approved is more likely to get a mortgage putting more confidence in the transaction going through.
Verified Funds
In addition to pre-approval, you may want to ask for proof of the down payment and closing costs are available. This confirms that the buyer has liquid money to fund their portion of the transaction at every milestone.
Contingencies
Be sure to check the contingencies of any offer since they can have a dramatic effect on the probability and timeline of a sale.
Common Contingencies
Common contingencies include financing, appraisal, home inspection—including pest inspection— and sale of buyer’s current home. The fewer the contingencies on an offer, the better handle is the offer. This is because the seller views fewer contingencies as reducing the risk that the deal will fall apart or be delayed during the closing process.
While the cleanest is the best amid the fewest conditions, see how each of these are going to affect you personally and your timeline. Accepting for example a shorter home inspection period may make the transaction smoother but take certain that it is reasonable for completing proper due diligence.
Closing Timeline
Your moving arrangements and coordination need to be in step with the closing date you are to accept:
Flexibility
Determine whether the date of closing that the buyer has suggested suits your desired time. If time is of essence to you, consider reviewing offers with the earliest closing dates first. Of course, the opposite may be true—a later closing date may be more suitable if time is needed to find a new house or complete your preparations.
Leaseback Possibilities
If you’ll require a longer period to vacate the property after closing, ask if the buyer might consider a leaseback. Some of the stress and anxiety around timing may be relieved, and the short-term tenancy agreement may add some flexibility.
Buyer Acceptance
Think about how accommodating the buyer has been to any requirements or conditions that they’ve included with their offer:
Find out if the buyer is flexible regarding requests for servicing of appliances or furniture. Flexibility in the ability to haggle for such details may see this transaction go on smoothly, and an excellent rapport between the parties can be realized.
Communication
Staying in touch with the buyers, regarding preferences as well as being prepared to negotiate, opens clear avenues towards a win-win situation. A successful sale is an offshoot of the agreement of two parties, with a clear understanding of the involved terms and conditions.
Effective Decision-making
When you have multiple offers, here are some strategic suggestions to help you decide:
Prioritizing Offers
Offer price, buyer financial strength, contingencies, closing date, and buyer flexibility are some of the criteria used to rank offers. Always give maximum priority to offerings closest to your financial goals and marketing objectives.
Consultation
To assist in the interpretation and comparing offers, consult your attorney or real estate agent. They will have valuable experience with contractual obligations, assessing the current conditions of the market, and parameters for the negotiation process.
Negotiation
In case any of the initial bids are not to your entire liking, it may be beneficial to accept counteroffers from some of the more serious buyers. If you agree to negotiate, keep the communication friendly, and in the counteroffer, do make some reasonable concessions towards key issues or priorities.
Strategies for Handling Multiple Offers
Consider the following strategies to manage multiple bids and maximize your sale price:
- Set a Deadline: Choose a Deadline Decide when buyers must finalize their highest and best bids. This accomplishes two things, besides giving you the best offers they’ll make.
- Tell Buyers that there are other Offers: Let every buyer be aware that you have had too many offers. This sort of transparency can bring you better offers and even fiercer conditions.
- Entertain Back-up Offers: Allow for offers even after you have accepted one. It is easy to move to your next best offer as when your first turns sour.
Conclusion
Here, too, getting lots of bids on your property is a great position, and it may sell your property way over your asking price. However, it takes deliberation in choosing the best deal in your interest, well-thought-out decisions, and negotiation skills. You can have every confidence in dealing with multiple offers, handling things like offer price, buyer financial strength, contingencies, and closing dates.
Paul Burrowes, CRS, CCEC, SFR, NHCP, LHC, REALTOR® Licensed REALTOR® with over 15 years of experience and expertise. Commits to being on time and transparent. Acts as your consultant to ensure you make the best decisions to fit your transaction at every step in the process. Negotiates towards a low stress, win-win outcome. Handles all the details for you, ensuring the hundreds of steps in your real estate transaction go smoothly. Proudly serving Silicon Valley, Santa Cruz, Monterey, and Santa Clara Counties! | DRE# 01955563 | (831) 295-5130 | paul@burrowes.com | Santa Cruz Properties
