It never ceases to amaze me that in real estate there is no standard of practice on how to deal with multiple offers on the same property. At least the Idaho Association of Realtors adopted a multiple counter offer form that helps, it still leaves a lot up for interpretation.
The seller wants to sell the home for the most possible while the buyer wants to offer the least amount possible. How can this ever be negotiated for a win/win scenerio without upsetting both parties?
The answer may be the use of an Escalation Clause. This essentially turns the property into an Auction between the potential buyers. Think of how an auction starts. Don't they usually start with a price that no one agrees to? Then they come down and finally someone bids. Then another, and another until there is a frenzy of bids. Each bidder has in their mind what their maximum bid will be but they don't disclose that until force to. They get there in small increments only after someone out bids them.
This is the premise of an escalation clause in real estate. I just incorporated such a clause for another client tonight for some Boise real estate. The asking price was $99,000. I new that there was another offer on the property, so we offered $99,100. I learned this trick decades ago from watching "The Price Is Right" where one contestant bids $1 or $100 over the next guy to win try to win. To some sellers, showing the buyer is willing to start over list price implies they want the house more so they will select that offer.
In this case, that strategy didn't work up front, so the listing agent presented all three offers with a "multiple counter offer form" giving them an opportunity to raise their bid. Buyers don't think they should ever have to pay list price let alone over list price, so this gets really tricky to explain without buyers thinking we are just trying to sell for a higher price and get a higher commission!
My solution is to incorporate an "escalation clause". Determine the price at which you would be upset that someone else bought the house instead of you. Then, keep your bid (offer) at the original price and let the seller know that you are willing to pay $500-1000 over the next bonafide offer not to exceed that maximum price.
Buyers often think the seller will automatically raise it to the top price; however, if you require it to be over a bonafide offer, they should show the other offer as proof of why yours was escalated. I effectively used this strategy yesterday and we bought the home for $4,000 under list price and $10,000 under his maximum price! The offer I wrote up for a different buyer today was $100 over list price but we are willing to go up to $3000 more if need be (the price at which they would have been mad if the other people bought it instead of them).
I had a client a few years back that tried this process in reverse when buying a car. He negotiated on the same make and model at two dealerships. When he finally got what might have been the best price, he asked to take the car for a test drive. He drove straight to the other dealership and showed the salesman how close he was to driving home a car from the competitor. The price dropped yet again!
This is just an example of what I do as a professional Realtor here in Boise, Idaho to help you buy or sell a home. I don't just use my fancy key to get you into a house and point out which is the master bedroom and which room is the kitchen. My job is to get you the best possible price, with the least possible headaches, in the least amount of time, causing you the least amount of stress possible.
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