This is a great post written by Bill Gassett, a top producing real estate agent in Hopkinton, MA. Even though Bill is in another state, most principles discussed here still hold true to Ohio real estate transactions.
The handling of multiple offers can be a tricky subject in Real Estate. Let's just say they are every buyer's agents nightmare and something that most listing agents look forward to. I say most because some Realtors try to avoid controversy at all costs and a multiple offer situation can sometimes get contentious.
Before getting into the art of handling multiple offers lets 1st discuss some basic parameters of an offer in general. In Massachusetts all offers whether verbal or written MUST be presented to the seller.
It is not at the listing brokers discretion to determine what is or isn't worth the sellers time to listen to. No matter how ridiculous an offer sounds, it is not up to the listing agent to be the judge of the offer. It is a violation of the code of ethics to withhold any offers whether verbal or written.
According to the Real Estate code of ethics Realtors shall submit offers and counter offers objectively and as quick as possible.
There are a few different scenario's in which a multiple offer situation could arise. You could have multiple offers come in around the same time in a given day in which case all of the offers should be presented to the seller at the same time or you could be in the middle of negotiations with a buyer and suddenly find out you are getting one or more additional offers.
In the 1st scenario the listing agent should be informing the buyers agents that there are multiple offers being presented to the seller. The buyer's agents at this point should be instructing their buyer clients to think about what their best offer on the property could potentially be.
One point that should be made clear is that a listing agent is not allowed to reveal the terms of a buyers offer to another buyer or their agent. The code of ethics requires that real estate agents treat prospective buyers honestly and fairly.
A Realtor who reveals the terms and conditions of a competing offer to one buyer gives that buyer an obvious advantage over the others which breaches the duty of fairness owed to the other buyers.
In most circumstances it would be in the sellers best interest to instruct their listing agent to ask all parties to come back with their "best offer".
The seller stands to benefit greatly as none of the buyers has any idea what the other offers are. If the buyers want the home they will be forced to step up to the plate and possibly pay more than they originally expected to.
Once the seller has received all the bids back, it is to them how they would like to proceed. It is possible that the seller could do one of the following:
- Reject all of the offers. Maybe the price isn't high enough or the closing date does not work. It is up to the sellers discretion on what is acceptable or not.
- Reject one of the offers and work with the others. Maybe this buyers financing was too risky no matter how good all the other terms are. In this scenario the seller could make a counter-offer to one of the other offers.
- Accept one of the offers and reject the others. This is the most common scenario because in most multiple offer situations the seller ends up getting the terms they desire.
The second scenario in which you have already been negotiating an offer and additional offer/offers come in needs a lot more care from the sellers/listing agent, as this is a scenario where emotions can create major problems.
Let me 1st state emphatically that there does NOT necessarily need to be any special treatment given to the 1st offer. After all, as a sellers agent it is your fiduciary responsibility to get your seller client the best terms and conditions.
Is it possible that the buyers agent is going to have steam coming out of his or her ears when this scenario comes up?
It sure is and you better plan for it. There are plenty of Realtors that don't know any better and will give a sellers agent an earful.You need to stand your ground and calmly remind the other agent what your job entails as a listing broker.
The code of ethics is very clear on this issue. "When acting as listing brokers, Realtors shall continue to submit to the seller all offers and counter offers until closing or until execution of the contract unless the seller has waived this obligation in writing."
The goal as a listing agent should always be to get the sellers the best terms and conditions. Is it frustrating to be in this situation as a buyer's agent...you bet it is!! Rules are rules though and this is how the Real Estate game is played.
Multiple offers are always a sellers best friend so to speak. In most circumstances a seller is going to walk away with more than if the multiple offer situation did not exist. The seller will most likely be in the drivers seat if minor issues come up with inspections as well. The buyer may fear the seller jumping to one of the other buyers who lost out if they raise too many issues.
Looking at the mutiple offer situation from a buyer's agents point of view should be to find out exactly what the seller is expecting for terms and conditions. It should not be assumed that PRICE is going to be the only deciding factor. Maybe the closing date or the amount of money the buyer is financing is just as important to the seller.
Over the years I have been involved with many multiple offers where the seller did not choose the highest bid. An example on a few occasions has been one of the parties being more flexible with extending a closing date so the kids could finish school. As a buyers agent you should never loose site of what could be important to the seller.
Besides increasing the price here are a few examples of what the buyer could do to make their offer more attractive.
- Shorten the time to get inspections done.
- Shorten the mortgage contingency date or remove it all together if the buyer is 100% certain they will get approved.
- Increase the escrow deposit over the normal standard for the area.
A few other thoughts about multiple offer scenerios....Make sure you document everything! As a Massachusetts Realtor for the past twenty three years, I have learned that being involved in a multiple offer situation can be a highly emotional event.
Buyers and their agents can get really ticked off when they are not the winning bid. It is wise to have your basis covered in the event someone accuses you of a wrong doing!
One last rule and I don't know why you would want to do this but it is not required that you inform other agents of the fact there is more than one offer on a property.
In fact it is at the SELLER'S sole discretion and choice whether this disclosure takes place. When the seller does give authorization, Realtors shall also disclose whether offers were obtained by the listing agent, another agent in the same company, or a cooperating broker.
Frankly I love getting multiple offers! I know when this occurs my seller clients are real happy and my list price to sale price ratio has gone up up up.
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About the Author: The above Real Estate information on Handling multiple offer for a seller in Real Estate was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at firstname.lastname@example.org or by phone at 508-435-5356.
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