Multiple offers can give sellers more flexibility and a better outcome
It’s not surprising that the same situations that seller's dream of are often a buyer's nightmare. Multiple offers are a prime example of just that. In a multiple offer situation, both parties will need to carefully consider their strategies so having a knowledgeable, trustworthy realtor is really important.
For buyers, choosing the right strategy will depend on how much you want the home. Start by honestly evaluating how well the home suits your needs and goals, both for the short- and long-term. If the home meets all your criteria, take a close look at your budget and determine whether you are willing to exceed it and adjust your lifestyle as required. This will give you a good basis to talk to your realtor and decide how to proceed.
Since buyers in a multiple offer situation have less negotiating power, they must be prepared to put their best foot (and offer) forward if they really want the home. On the flip side, sellers who receive multiple offers are able to choose the one that’s right for them, and that choice can vary depending on what’s important to them. This means that, when preparing their offer, buyers should think beyond price. Sellers may have other priorities and may be swayed by other concessions such as closing date, deposit amount, condition date, or inclusions. They may also have an emotional attachment to the home and like the idea of it going to the “right” owners.
I faced this situation recently with one of my clients. I was representing the sellers, a lovely older couple who was downsizing and selling their family home. Because the area was in high demand due to the school district, we received multiple offers, including one from a young couple. The buyer’s agent presented the offer in person and included a letter from the buyers to the sellers, describing their fondness for the home and their vision for their family’s long-term future in it. My clients were so charmed by their story that they selected their offer over the others even though they were not the highest bitter.
Since multiple offers can give sellers more flexibility and a better outcome, some sellers may underprice their listing in an attempt to start a bidding war. This is a more common strategy in busier markets with high demand, but we may start seeing it more often in Nova Scotia if our market keeps improving.
It’s important to note that sellers aren’t required to disclose that they’ve received multiple offers. The decision is made when signing the listing contract and gives the seller’s agent permission to disclose. There is a risk that divulging multiple offers may cause some buyers to withdraw their offer rather than participate in a bidding war, but in my experience, this doesn’t often happen. While the decision is ultimately the seller’s, I usually recommend to my clients that they allow the disclosure.
I once represented a buyer who was looking for a new home for herself and child with special needs. We found a property that provided the ideal environment for her child, but because it was waterfront, it drew multiple offers. Fortunately, the seller had given their agent permission to disclose which gave us an opportunity to think closely about the offer we wanted to present. We decided that, because the property fulfilled so many of her needs and she knew she would live there for many years, we would present a full-price offer and be flexible with the closing date. This ended up being the right approach since the seller was looking for both a good sale price and a long closing.
Sellers’ agents that have permission to disclose can inform all buyers’ agents giving them an opportunity to adjust their offers if they wish. If there is an accepted offer a buyer may choose to submit a back-up offer. Back-up offers come into play if the primary offer falls through due to financing, inspection or any other conditions. It is in the interest of a buyer to submit a back up offer because if the first accepted offer does not come together then the second buyer’s offer comes into play preventing the property from going back on the market with no risk of being in a multiple offer situation again. There are a lot of approaches to preparing a back-up offer, and I work closely with my clients to maximize their chances of success while respecting their individual constraints and objectives. One of my sellers received an offer on a property they wanted to sell quickly but unfortunately, they had already accepted another offer the day prior. The second offer was actually better than the first – full price, no financing or inspection, and a quicker close. The buyers submitted a back up offer that was accepted by the sellers and when the financing on the first offer fell through, we were able to quickly proceed with firming up the conditions on the back up.
An experienced realtor will often anticipate multiple offers based on their knowledge of the market and the value of the property. When multiple offers are likely, buyers should be as prepared as possible before they present their offer. Since sales contracts typically include a deadline to complete all necessary conditions, being ready to discharge the conditions quickly can shorten that deadline and get the offer accepted sooner. Here are some things to prepare in advance:
All required documents filed with your financial institution
Insurance provider ready to go
Home inspector selected
Real estate lawyer waiting to review the sales contract
There are clearly a lot of considerations with multiple offers, and that’s why it’s so important to work with a realtor who can offer you the best guidance. My experience gives me a great knowledge of the local market to help my buyers compile their best offers and my sellers properly assess them. I am proud of my reputation for integrity in the industry and my clients know they can trust my advice and judgement. I have great relationships with many other agents, positioning me well for effective and tactful negotiations. I also strive to be as responsive as possible so that we can respond quickly to offers and counter-offers and hopefully avoid getting into a multiple offer situation.
So no matter whether you’re buying or selling, managing multiple offers is all about strategy. Make sure your strategy starts with the right realtor.