These days it is not uncommon for more than one buyer to want a house. When a buyer decides to proceed with an offer on a property their Realtor prepares the required documentation, has everything signed by the buyers and then ‘registers’ that offer with the listing brokerage by formally advising them of the existence of an offer available for the seller’s review.
Should two or more offers be registered on a property before the property has been sold then a multiple offer scenario or “bidding war” ensues.
Multiple offers or bidding wars almost guarantee the seller top market dollar, sometimes even beyond fair market value!
This is where experience greatly counts in a Realtor.
A professional Realtor will assess the current market conditions and suggest the appropriate strategy to induce multiple offers. When will you look at offers? Is this sufficient time for all buyers to have had the opportunity to inspect your home? Is it too long? Are offers also scheduled to be presented on another property that would be competition for you? Is this offer date the day before or after a long weekend? What is the long-term weather forecast? (Yes, weather counts).
Setting the stage to produce multiple offers takes talent, expertise and finesse. Make certain your Realtor is up to the job.
Here are the key ingredients for success:
- Try to meet the buyers beforehand. It is good to sell to people you have met and feel would be good buyers for your home.
- Know the market so that you are in a position to accept or negotiate with one of the offers.
- Make certain that all sellers are available to review and authorize documentation on offer night.
- Carefully analyze each offer, summarizing the comparisons on a single sheet. Sellers almost always sell to the highest offer but that is not always the best decision. A firm offer is worth substantially more than a conditional offer, no matter how reasonable the condition may be. Tomorrow their high priced conditional offer could fall through and you have lost the buyer in second spot that had a firm offer.
- Buyers are encouraged to bid high on the first round of multiple offer negotiations. Buyers may come up from their initial first bid offering if given the opportunity but realize that the risk of sending the buyers back to produce an improved bid gives the buyers an opportunity to rescind their offer. If they decide to rescind for any reason you will have lost that offer. Don’t send buyers back to improve their offers without confidence that you will not lose the offer you really want.
- Huge deposit — certified cheque or bank draft. Huge deposits provide sellers with great security and comfort. Who can afford to walk away from many thousands of dollars?
- Have in mind what date your ideal possession date would be. Encourage your Realtor to try to get a flexible closing date written into the offers beforehand if you are not yet certain as to the very best date for you to complete the transaction. This gives you the opportunity to set your exact preferred date down the road.
- Look for few, if any conditions in the offers. A firm offer is worth considerably more than an offer that contains any condition. Even reasonable conditions can be used by a buyer to rescind the transaction before expiry of the condition should there be a change of heart.
- Typical conditions to expect: Building inspection. Prudent Buyers want to have a house inspected before submitting an offer. This is understandable, however they have to balance their need to have a building inspection with the fact that winners in multiple offers usually have firm unconditional offers. Maybe they can have it inspected before the date set to look at offers? Better yet, you as the seller could consider having a building inspection done yourself by a reliable and known inspector so that prospective buyers can review the building inspection report before offer date. Financing. Buyers really should have their financing in place before they submit an offer. They should have talked to their mortgage broker, their bank manager or existing mortgagee before they got to the multiple offer submission stage on a house. Carefully review with the Realtor why any financing conditions were deemed necessary.
- Removed conditions. If a buyer had a condition in their original offer but subsequently removed the condition from the offer should negotiations have gone into a second round, find out if they really needed the condition and just removed it under the pressure of a multiple offer situation. Can they close without that condition?
- Buyer covenant. See if the buyer has proven their overall ability to close the transaction. What is their career or do they have a letter from their bank stating that they are in a position to complete the deal? Where is the money coming from? You are entitled to know.
- Do they have a house to sell? Has it already sold? When does it close? If not sold, what happens if it doesn’t sell before they are scheduled to close this one?
- Have they asked for things in the offer that you have not already included in the listing? Carefully review the extras section of the offer.
Have faith and trust in your Realtor. If you don’t trust your Realtor by the time you are into a multiple offer scenario, you are dealing with the wrong Realtor and now is not the time to find that out. You can absolutely gain up to a fortune more by listening to the counsel a trusted, experienced Realtor can and should provide when in multiple offers. Don’t leave any money on the table. Your Realtor should give you insight and informed options. Consider them all and make the most aggressive choice you can.
No drinking until after the deal is done. And that includes your Realtor too.