Today’s Boston real estate market is highly competitive. There is the biggest shortage of inventory in a decade, and the historically low mortgage rates are fueling high buyer demand. This is leading to many competitive bidding situations for desirable properties in high demand areas of the city.
Great news for sellers, right?
Multiple offers are a tricky situation for sellers. It is a nice “problem” to have, but the situation needs to be handled delicately and transparently for all parties involved so it doesn’t blow up in your face. Some age old clichés come to mind…..
Hogs get slaughtered.
One in the hand is sometimes better than two in the bush.
But multiple offers can yield a great end net result for a seller if handled properly.
Let’s say you’ve valued your home perfectly and it has created multiple offers (how to do just that will be the topic of a future post).
The bottom line is that buyers detest being in a multiple offer situation. They feel as though they are getting “bullied”, and the seller must walk a fine line between maximizing their own personal needs, and not simultaneously turning off buyers and creating ill will – especially considering the transaction will be ongoing for a month or more even after the bidding stops.
On several occasions I’ve seen what seemed like advantageous multiple offer situations just evaporate with all the buyers walking away from a deal – simply by the way it was handled by the seller and their agent.
How do you prevent that from happening?
The first thing to consider is that an offer is not just price. The terms of the deal matter just as much.
- How strong is the buyer financially? Is their loan assured?
- How experienced are they emotionally (1st timers versus seasoned real estate buyers)?
- Do the closing dates work?
- Is there a discernible difference in their respective contingencies?
All of these issues are very important when weighting your options as a seller.
Assuming there are multiple offers that are similar in price and terms, then a common, and effective strategy is to ask for everyone’s “best and final” offer by a specific time (typically 12-24 hours from receiving the multiple offers). I have always found that the best strategy when asking for a “best and final” is foremost to ensure that they are both (or all) worthy of putting people in a “best and final” situation. There is no need to force everyone into an emotionally volatile situation if there is 1 party that is a clear cut, far and away a “better” option than all the other offers. Leveraging the competitive landscape is a great thing, if done properly; if not, it can be disastrous.
The one element of this process that I am adamant with my seller clients about is that “best and final” is a one-time deal. I think it is a questionable strategy to ask for “best and final” offers, and then try to go back and negotiate more. Yes, we all know there are exceptions to every rule, but I think this shows a lack of courtesy and credibility that can end up having a negative impact on a transaction, versus helping it.
Another factor for sellers to remember is that the market is the best indicator of value. If you have a hot new listing and get lucky enough to get in a multiple offer situation, then there is no more opportune time to learn the true value of your property….even if none of the offers are at, or over the asking price. Buyers will often stretch their budgets and drop any “hardline/low ball” negotiating tactics, if they know there are other interested parties. After all, they have to. That being said, if there are multiple offers, and the best one is still 3-5% below the asking price, then the odds are that is still going to be the best offer for the property. Thinking other buyers may come along in a week or 2, and be as aggressive is not a wise assumption.
At the end of the day use your “newness” on market and the competition buzz created by multiple offers to get the best deal you can for yourself as the seller. Just be disciplined enough to realize the context of this fortuitous occurrence. Treat people ethically, fairly, and appreciate that multiple offers typically will only happen once, and knowing how to handle it will ultimately help you achieve the most optimal end result.