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Negotiating Multiple Offers. A Tutorial.

Hi Folks, If your market is saturated with REOs, as mine is, you may be incountering multiple offers quite frequently. This article, I wrote a couple of years ago. may help you deal with them.

Negotiating multiple offers.

I don't know about you but I love things in multiple. Multiple zeros on my bank balance, multiple listings, multiple closings and of course, multiple offers. Multiple offers, are one of my favorite things. It really places my Seller in the driver's seat when it comes to negotiating and normally means we will be able to get a higher price for the house.

What I don't like, is a common misconception, from Realtors, that I have to disclose multiple offers to them. Or, that I have to disclose the existence of any offers to them, whether received or not. Sometimes they expect this before they even show the property. I have even been accused of being "unethical" for not disclosing an offer. So first, let me make something perfectly clear, offers, whether one, or multiple, are nobody's business but my Seller's and mine. How we choose to handle the negotiations or disclosure is 100% my Seller's choice.

Standard of Practice 1-15

REALTORS^®, in response to inquiries from buyers or cooperating brokers shall, with the sellers' approval, disclose the existence of offers on the property. Where disclosure is authorized, REALTORS® shall also disclose whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker.(Adopted 1/03, Amended 1/06))

Standard of Practice 3-6

REALTORS^® shall disclose the existence of accepted offers, including offers with unresolved contingencies, to any broker seeking cooperation. (Adopted 5/86, Amended 1/04)

Accepted offer, means, a pending contract. Florida law is quiet on this issue, as it should be. Negotiations are not dictated by State laws. And I'm sure you State's laws are quiet on this as well.

So how do we handle multiple offers? Well, I am sure there are many ways, but here are a few examples of the way I do it and that seem to be quite common in my area. I will be curious to hear how they are handled in your area.

Notify all Realtors/Buyers of multiple offers and request "highest and best" by a certain day and time. This technique is used quite a bit in my area, especially on bank owned properties. It is a pretty good way to weed out the lookers and concentrate on the serious buyers. Works best when you have numerous offers. Once they have submitted "highest and best", the Seller can pick one that is acceptable, choose one or more to continue negotiating with or set another day and time and ask for "highest and best" again. Repeat until there is an acceptable offer. I've been the Buyer, on several foreclosures, where this technique was used and frankly, I ended up paying more than I wanted for the property. It turns into a competition and I hate losing. So this method definitely works.

Don't disclose the existence of other offers, pick one and try to negotiate it. If you can't, pick another one and do the same. The problem with this technique is it may take a few days to negotiate on one contract and while you are doing this the other one may withdraw their offer. Not one of my favorites but can work if you are already negotiating when the second offer comes in.

Don't disclose and negotiate all offers at the same time. I actually have done this many times. The key though is to make sure the Seller does not sign the counters. If they do, and the Buyer accepts it and signs, then you have an accepted offer and the game is over. This can be a good technique if all the offers are pretty close in price and all the Buyers are equally qualified. Then it is just a matter of who responds the fastest(motivation). You don't disclose, because then they would all respond quickly. You want their motivation to be, that they are anxious to purchase, not that they are anxious to beat out the others.

Disclose the existence of other offers and the amount of the offers. Play them against each other. Let them know they are competing and if you want this property you will have to beat the offer, or offers, I have on the table. Continue until only one is left. Hopefully it will be way over list price by this time. I used this technique during the boom time, so many times I can't count them. Very successful way to negotiate.

It is very important, that however you want to negotiate multiple offers, it is the Seller's choice, not yours. Do not disclose multiple offers to another Realtor with out the permission of the Seller. After all, it is his deal not yours. So there you have it. I hope this helps. I am by no means an expert on this but I really do love multiple offers.

So next time a Realtor ask you this, "Do you have any offers on this property" try this "I'm sorry, that's confidential information but as we speak, this property is still actively on the market." Does this help?

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Posted by Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc on 04/14/2009 10:16 PM

Comments (81)

Negotiating in the Training Channel

multiple offers, education

81 Comments on Negotiating Multiple Offers. A Tutorial.

APR

Reserved Parking For "The Lovely Wife"...TLW...ROAR!

Hun...

I better hush :)

TLW...ROAR!

Great info. I am always in the market for a refresher-Dinah Lee

Number 4 is my choice! I enjoy how you make a point to tell everyone it is the SELLERS choice! So many agents forget that fact! Nice piece!

Great information, of course when working with buyers I will still ask the question. :)

Happy Sales,

dawn

I have noticed that properties will be on the market for some time and as I go to put in an offer, all of a sudden there are muliptle offers. Now tell me how would you handle that?

Bryant - Well-written reminder and tutorial on multiples! Thank you!

Bryant, I had a big producer pretty much stop talking to me because I did not tell her of an offer on a home per my seller's instruction for which she also had an offer. I continue to be amazed at behavior like that.

BB - great tutorial. It's very common for the reo's in my area to have multiple offers and ask for best and final. Also, most of them will tell you if there are any offers in on them.

Bookmarking this post!

Hi Bryant...Just had two offers on the same day for a property that had been on the market for way too long. We did best and final and now have a ratified contract.

Kate

Great tutorial! I will keep it in mind.

Good tips Broker Bryant, I just did a best and highest today in Manhattan New York Real Estate market. I can't say everyone was too excited about it. Especially in this market where buyers think they can have everything their way...!

I usually go with your first method. However, our REALTOR Association offers classes, as I'm sure yours does, and there is a way for a seller to make a counter-offer on every single offer that's on the table. I can't remember the details of how to do it though. I'll bet you know though. It sounds like something you would know. How about another blog? ;-)

Nice post and a good reminder for those working with REOs.

Muptiple deals? I'm a juggling expert Bryant! Say hello to that crazy woman for me...lol!

Great advice, Broker Bryant. And another bookmark!

Oh how true this is and I think the problem is so many realtors get used to others being laid back about what they say. I love you the multiple zeros in your bank account I hope there is a solid number in front :)

You want their motivation to be, that they are anxious to purchase, not that they are anxious to beat out the others.

I will take your pointers and pay specific attention to this one.

I'm with you on this one. Back during the boom times, I created a multiple offer section in our company policy manual. We have all 4 of the scenarios you mentioned. I do prohibit sales associates from allowing sellers to sign more than one offer if they are doing multiple counters. There is just too much trouble that can happen if the seller somehow got 2 accepted offers on a property.

It's been a while since I saw multiple offers, but back in February I sold an REO that got 5 offers within the first weekend it was listed.

It can be a double edge sword sometimes. It is all up to the seller!

I have had the best luck negotiating each offer, without disclosing. I have, at a sellers instance, lost all interested parties with the highest and best scenario. I personally don't like that one at all. Reminds me of sharks on a feeding frenzy, and when it is all over with there is nothing left.

I have had my face ripped off for not disclosing multiple offers, and ripped right back. I asked the agent if he disclosed that type of information without the consent of his clients.

All, of course, with the direction of my clients.

And no one signs the offers unless they are taking the offer, that's for sure. If it ain't signed, it ain't nothin!

We are going through this right now. The "highest and best". Although it is good for the bank. Here is the dilima for buyers. One of my buyer agents will be working with a buyer qualified for 85K, a listing comes up and then they go look like ASAP. Multiple offers come in and they can't go higher.

Great tutorial but not without some challenges.

Bryant,

Great post and very helpful. I'm starting to see more multiple offers again. It is encouraging.

Hey Bryant, There is little more fun than getting multiple offers on your listings!

When one agent asked me if there were any offers in on the property, I told him I'd have to get permission from my client to disclose that information. He just looked at me in disbelief and said no one had ever said that to him in his entire career. Well, that's a fact, we are just agents and can't reveal info about other offers until our clients give us that permission. I'm going to use your line next time:

That's just perfect!

I never disclosed the amount of the other offers. I always tried to make the buyer's negotiate with themselves. It was lots of fun back in the day :-) We are seeing a little of it here but not that much - yet.

We are seeing lots of multiple offers here, mainly on the REO's. It is getting pretty crazy. The bad thing is the buyers are getting frustrated in writing so many offers (good ones, over asking price) and still can't get them accepted. I am hearing this from many of my colleagues as well. When working with buyers, this can get frustrating. Our inventory is down to 2.7 months, feels like we could be turning the corner.

I think the easiest way to handle multiple offers is highest and best. Has it worked for me, not really, the buyers back out.

ABSOLUTELY! It is 100% the seller's decision as to whether or not you disclose this--some rather cocky agents think it's their option. One scenario that I can't stand--especially right now, is when I get the call after a second showing that there is an offer coming in on a property that's been on the market for a YEAR! I SO wish there was a way to prove that there is NOT an offer out there--it's just the agent trying to get us to make a move and a high one at that. The problem is, I recommend that my client either move to their second choice or sit and wait to see if the status on their first one is changed--chances are, they opt to go to another one--if they think that the agent is not above-board, they think the sellers are too and they don't want to deal with them.

Anyway, I'm sure the sellers don't know their agent is pulling this crap either!

Have a wonderful Wednesday and give Lovely a hug for me!

I tend to use choices one and four with the permission of my seller. We're starting to see a lot of multiple offers.

We discuss the options with our sellers that it is in their best interest to disclose the other offers so the buyers can come in with a highest and best price. This has been very successful for us. This is a very controversial subject among real estate agents and even when everything is disclosed, there are some agents who will be very upset if their buyers don't 'win' the bid. That is very unprofessional but true.

I'm thinking in a situation where a buyer made a good offer and then another lowball offer came in, that might be a situation where you wouldn't want to disclose because you wouldn't want to scare off the first buyer while you were negotiating. But usually it works to raise the offer and is good for sellers.

Hmmmm.....you've just made aware of a few things that have my mind going now. Thanks a million for such a timely post!

Bryant- We love multiple offers too. Unfortunately our pet peeve is with the mls who is always on the side of the buyers like they need to protect them from the evil sellers. But this time around, the sellers are not really the 'store'; we are here to keep our sellers from getting foreclosed on.

What we have been doing lately is making the buyers agents bring strong contracts that are effective at the time of signing, not at the time of short sale approval, hard money down, cash is best, all contingencies removed asap and then we will take their offer and put the others in back up position.

We don't pit one buyer against another. We do let agents know that there is an offer on the property and that we are more than happy to entertain theirs as a back up offer. But if they are all coming in at the same time then we tell them to bring their highest and best price and TERMS. A high price is no good if the buyer can't get financing:)

We never submit more than one at a time to the short sale lender for short sale payoff approval because we have found that some lenders then thing that the price is too low and they counter back unrealistically and then we just hurt our seller. Also, some banks won't entertain more than one, like Chase won't and CW won't.

APR

Thank you. Now I need to go check on my CA regulations and see if we are / are not required. Thank you for that heads-up.

I usually recommend #4 or #1 to my sellers, depending on the situation and the # of offers.

Per Debe's comment -- I am SO suprised how many agents are calling me to tell me they are 'expecting an offer' on their listing (that's been on the market for almost a year). It used to happen every now and then, but now I have agents calling 2 to 3x per month.... a little bit like the boy who called WOLF! :-)

Thanks for sharing the helful information.

Bryant - Negotiating is an art - negotiating multiple offers is even more so. Which ever strategy is used, it should be used with the full knowledge and consent of the client. Like Debe, we are always amazed at those 'offers' we get a call about right after we have shown a property a second or third time! Thanks for a timely post.

Mary

This Standard has a revision since you wrote that post. "shall disclose, if asked"

Standard of Practice 1-15

^®

Excellent post, Bryant. It is up to the seller to decide on disclosure on multiples. Too many times agents make a decision regarding offers they shouldn't without seller's knowledge or permission.

Great tip. .I'm so glad we are talking about this subject again. . .

Best and Final seems to be popular choice these days- I actually had an agent demand I send the offer on the table (which of course I had no obligation to do and my seller had no interest in proving we had one) while this was transpiring we simply sold it to the buyer we had.

Excellent and timely piece

BB...

You know I love you man, but here's the problem: Why would a bank NOT want you to disclose offers on the table? There is absolutely no benefit to them to keep this information confidential.

Especially if they expect the taxpayers to bail them out for their failures, shouldn't they ... and YOU, do your best to get them the most money for a property?

A normal seller can take a loss, who cares ... but an institution that has stockholders and Federal ties is MORALLY obligated to the public to do whatever they can to get the best deal.

What say you?

Thanks for the tutorial... very timely in fact for everyone in this market.

I have had multiple offers where one of the Realtor's didn't understand my JOB and responsibility. As you stated, it is not fun to hear from one of the Realtors that is upset that you did not let them know that there was another offer, "they would have liked to have increased their offer". I always tell them they need to speak with their manager regarding mulitiple offers and the job of the listing Realtor is such cases. They really get mad and blame their clients loss on you. I would love to speak to their client and explain to them the facts.

Thank you for the refresher on multiple offers. Most of my sellers asking me not to disclose multiple offers...so most of time my hands are bound.

Bettina

I have been dealing with this myself. Good info. Thanks for the post

Bryant - A great reminder lesson for us all! Thanks for the wonderful post!

Nice to see a recap of common sense. I've had an instance where it worked against me. There were multiple offers and the sellers just couldn't make up their mind. I went with the highest and best approach with a day/date cut-off. When it came time to close the deal, there was only one offer left and it wasn't the best offer they had received. I guess some people just don't like the auction approach and don't think they can compete, especially when there is so much inventory.

In Oklahoma on REOs, it starts with highest and best. Once the bank accepts the offer as a rule, they do not accept backup offers by their choice. This is where it can get dicey. Oklahoma law does not interfere with this process, but in one case, we were the receivers of an attorneys letter citing our lack of ethics for refusing. We had politely told this person that highest and best was offered, and that the potential buyers back up request was 3 weeks after the fact, and the banks position was that if the accepted offer failed, the process would start again. Mom was right, you can't please all the people all the time. FYI, we had six other offers submitted, and all of those said, please inform us if the main contract does not close.

BB - You've spelled out the options very well. However, I don't see the benefit in telling them you don't have to disclose whether there are other offers or not. Why not tell them? It seems to me, you create a deception if you don't have any others. And if you DO, it creates competition. I will answer "I have two others, I'll be submitting at 6pm this evening" (or whatever). I tell them nothing else other than the existence of the offers. to me that seems fair to all, and in the seller's best interest.

As always a great informative post. Thanks!!

Patricia Aulson/Portsmouth NH Real Estate

Great post I agree...I too love to have Multiple zeros on my bank balance, multiple listings, multiple closings and of course, multiple offers.

Notify all Realtors/Buyers of multiple offers and request "highest and best" by a certain day and time.... this is also used here in Las Vegas a lot. Great for sellers, but my buyers don't always have the love when I show it to them.
Disclose the existence of other offers and the amount of the offers...This has worked out great for me..I also have sellers that have put in writing that they won't even look at offers under X amount...or a letter that is sent when an offer is rec'd to that extent ..seller is not accepting any offers less than X amount...this one depends on market conditions a lot too.

As I was reading this I got a call on an reo to have my buyer submit their best and final by 2:00 this afternoon - LOL!

Yesterday I had buyers that cancelled an appointment because I was told that there were already 2 offers on the table. So my buyers viewed other properties instead as they didn't want to be involved in multiple offers.

As far as homes on market for a long time and all of a sudden there are multiple offers, I had this happen with my listing. We reduced it since my sellers found their next home and purchased it non-contingent, so now they were really serious about selling their place. Yes, it had been up a while (including with an agent prior to me). A lowball offer came in and we gave a counter-offer.

Lo and behold, a 2nd offer came in and I notified the first agent. His buyers did not believe there was a 2nd offer "after all this time on market." They learned there really was since they lost out.

Good practical Technical Advice. This is the sort of post I need to see more of.

Baby...

You help so many people with this stuff. Have I told you lately how proud I am of you? :)

TLW...ROAR!

Agree 100% that it's the SELLER'S choice.

It is the Seller's choice - something that seems to be forgotten on occassion.

I don't like multiple offers even when I represent the seller. Too often buyers just don't tolerate the auction-like situation. If we are in multiple I personally like the fourth option - disclose the existance and the amount of offers. However, it's not about my likes or dislikes. It is the seller's choice.

How do you deal with multiples on short sales? Just curious.

Great comments everyone!!

Thanks Miriam for pointing out the revision to the CoE:

Standard of Practice 1-15

REALTORS^®, in response to inquiries from buyers or cooperating brokers shall, with the sellers' approval, disclose the existence of offers on the property. Where disclosure is authorized, REALTORS® shall also disclose, if asked, whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker. (Adopted 1/03, Amended 1/09))

fff

"with the seller's approval"

then you can't.

My opinion is that the "highest and best" is the easiest and the fairest approach but is certainly not the best for the seller. I know when I am working with buyer we will many times just withdraw our offer when highest and best is asked for and move on to another property. The buyer doesn't want to get into a bidding war.

Personally I prefer keeping multiple offers confidential and negotiating all deals at once until we reach an acceptable price with one of the buyers.

There is no right or wrong way. Just remember our job is to counsel the seller and let them decide what's best.

Ok I'll be back!!

Good question from Svetlana. "How do you deal with multiples on short sales?"

Dealing with multiple offers on a short sale is no different. Remember with a short sale the negotiations are still between the buyer and the seller. Once a deal has been reached and a CONTRACT signed by all parties then it is submitted to the lender to have the 3rd party contingency removed. The fact that it is a short sale does not affect the negotioations in any way.

As a Buyer only Agent/Investor I absolutely want to know how many offers are on the table. My job is to negotiate the lowest possible price and/or terms for my client. Personally, I don't see why the sellers agent would want to keep multiple offers secret since their job is to get the highest price. When there are multiple offers on the table I have virtually no chance to negotiate anything. That's why my first commandment to my buyer clients is to make sure that they don't fall in love with that Home! There's plenty more where that one came from!!!!!

Matt, I think you just answered your own question:

"Personally, I don't see why the sellers agent would want to keep multiple offers secret since their job is to get the highest price." THEN YOU STATED: When there are multiple offers on the table I have virtually no chance to negotiate anything. That's why my first commandment to my buyer clients is to make sure that they don't fall in love with that Home! There's plenty more where that one came from!!!!!

Now if you didn't know I had multiple offers wouldn't your buyer be more willing to negotiate? Your response implies that if your buyer was in a multiple offer situation that they may just choose to walk since they have lost their negotiating power. By the way, I completely agree with that statement. Which is why maybe not mentioning there are multiple offers could be best for my seller.

What do you think?

Remember it's not what we want to do it's what our sellers want to do .

I think we forget that its the sellers choice sometimes. However its to their advantage to disclose multiple offers or another offer. The interested buyer then needs to bring their best with no messing around.

Bryant - Thanks for the tutorial and for sharing your experience.

I hate when other agents state: My buyer is interested, so let me know if any other offers come in before I pin him down.

I always reply: I cannot guarantee that. Perhaps you should write an offer if your buyer is interested, as I may not be able to call you if another offer comes in and is accepted.

My best to you and the wife Bryant.

BB: This is an awesome tutorial thanks for taking your time to put it together and for sharing it with us. Personally, I like multiple offers. Infact, in this market, I like any offers. Thanks again for such a great post.

I am just glad we are getting offers ad homes are starting to move. But good read and you have the house seal of approval.

Great post! This kind of post will help greatly those of us who are new to the business. Until now, faced with multiple offers, I would have thought acknowledging the existing of other offers without providing any other details would be the right thing to do!

BB - Very informative post. I agree with all your strategies and have used them. It's great that you pint out that it needs to be the seller's decision on how to handle more than one offer at a time. I don't think a lot of agents get this.

APR

Your right BB that it's the seller choice on how to handle the multiple offers when the situation arises, not yours. I'm not sure that a couple points would make you a favorite with buyers agents but then as the lisitng agent, who cares. I am thinking it doesn't sound cooperative to the other agent, if you said that to me I'd reply 'and what does that mean?'

APR

Very informative post and a nice refresher for when multiple offers come back to our area! We usually use highest and best but have a multiple counter offer form where the seller can send out counter-offers; the buyer can agree and sign and nothing is valid until the seller reviews them and does a final signature on the one he accepts. Haven't had to use that one in awhile!

APR

It depends on the state in Southern Virginia are listing agreement has a box that says I authorize or I do not authorize agent to disclose multiple offers, that seller checks.

APR

I like the fourth option as well. It separates "the men from the boys", as it were. Thanks for the post.

APR

Here, we can disclose how much is being offered, with the seller's permission. My question, is why don't seller's agents disclose the highest offer amount? I think you would get that bidding war fired up much better that way. I have done this, and the buyers went thousands of dollars higher than they said they would. That's money in my client's pocket. Why wouldn't sellers want that if it's explained? I think agents who do 'highest and best' either don't realize they could do better for their clients, or simply want to do things the easiest way.

APR

Had to comment again. Actually a statement and a question? Here in California, if the buyer makes a full price offer-the seller is obligated to sell the property at that listed price. If I-the buyer find out that you the seller took a higher priced offer after mine. I can sue you-Period! How is it in your State??????????????

Matt, you're going to have to show me that law because I believe you are mistaken. The listing broker MAY be able to sue for a commission but that's it.

APR

I think the "highest and best" response is both lazy and cheeky. Of course it's up to the bank to do this, but of all the times it's happened to my buyers, they've already submitted a superbly clean over-list price offer. Only 24 hours later to get that smug call that the bank is calling for "highest and best." I haven't ever had a buyer decide to write a new Page 1 and increase their price because there are plenty of other houses to buy in our REO saturated market. It's amazing how manners (like a proper counter offer) make for a truly successful contract and escrow. Calling for highest and best doesn't weed out looky-loos, it disgusts great buyers. Who move on and buy something else.

I always tell my seller about this "do you have any offers" question during my listing presentation and tell them it's my philosophy to tell every caller and every inquirer the same thing: the truth. Every time they call. You can be polite and say, Yes, I have three offers and it's still active so please go show it. And all my sellers have agreed. None tells me to keep quiet.

Maybe this openness makes the difference to that buyer's agent if they actually take time to see my listing or not. And I have had dozens and dozens of multiple offer scenarios that have always been handled the same: everyone knows, every gets countered unless it's an embarrassing offer that isn't even close to working. Everyone is professional and all offers are disclosed without disclosing terms.

Being very open, very honest and very kind has been very successful for me. And my sellers. Even bank properties!

(and Matt is mistaken...)

APR

Kimberly, I too feel "highest and best" is lazy. I prefer to keep multiple offers cponfidential. But of course evfery case is different. To me it depends on what the offers loook like.

APR

And, of course, the 5th example whereby the seller decides (based on the multiples) that YOU listed the property too cheaply and is unhappy with all the offers.

Great post, Bryant.

MAY

Great info, i agree, it's in the sellers hand. I like it when the sellers ask for the highest and best! I also like your reply to the realtor that ask if there are other offers - as we are speaking the property is still on the mls- that's a good one. thanks!

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Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc

Poinciana, FL

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