I'm asked often about multiple offers and so here's how I handle a couple scenarios; one will be a (mostly) move in ready house with most offers coming from principle owners. The other scenario reflects a tear down or fix n flip investor house.
Mostly Move In Ready Home (minor repairs, subject to cosmetic updates) in Multiple offers:
On my last property in multiples we had 17 offers. We reply to all offers with the Seller Multiple Counter Document provided by C.A.R.
We countered the Top 3 with a strategy of mostly cleaning up terms, since the offer prices was at or over asking price; so each received a custom counter, as if they were our only offer in hand. We wanted to clean them up without scaring them away. But I will reduce time frames and occasionally eliminate appraisal as an out. This only serves to scare off buyers that do not intend to honor their price, in reality, they have other outs, but it's a psychological chess match at this point.
We countered the next 7 with a highest price match to our best offer (from the top 3) and cleaned up the terms - all got the same counter, we were mostly seeing who stayed and if they signed or if they countered back. Countering back was great because it allowed us a second opportunity to fine tune our counter offer.
The remaining 7 were too low to address, we thanked them and encouraged a new offer. If by chance the re-wrote, we'd bother to counter them. However as suspected, none did, as they are typically from "investors" who are just "shotgun-submitting" offers all over town.
Our buyer came from the original Top 3 offers received, since none of the bottom 7 re-wrote (investors). Only one of the blanket-countered-7 replied and were still too low to consider.
So how did we choose now that we leveled the playing field? The custom-countered 3 were eventually only differentiated by:
1. original EMD (strength of buyer)
2. original offer price (original intent)
3. and how they replied to our counter (cooperative & motivated).
4. caliber of agent representing them
5. only 4 of the 17 submitted cover letters and two had come from our Top 3. Yes, that mattered to my sellers. So the one with the most of combo of these 5 criteria was chosen.
Ironically the #1 ended up canceling due to inspection reports. #2 Offer was immediately notified and stepped up. They didn't care about the discovered repairs since they were making some remodel changes anyhow and closed in 30 days, they loved the house, lot & location.
I always keep a motivated backup and I keep all our back ups in the loop weekly to keep them emotionally involved. TIP: I strongly recommend you communicate updates politely to your backup offers (with limited appropriate info per fiduciary duty). The agents and buyers really appreciate this, which makes them better backups when needed.
Fix N Flip / Tear Down Home (major repairs, cosmetic , structural & systems updates required), typically all cash deals in Multiple offers:
See above a couple exceptions:
I essentially follow the above scenario but since loans rarely come into play, I do not have appraisals to help me leverage the price commitment. Every buyer gets a counter, no matter what to install the following terms, even if the price is right:
- 100% cash offers must close in 7 days or less. 10 days max if there's a legit reason why.
- All contingencies are to be removed on day 3 of acceptance by 3pm or the seller will cancel.
- We apply a $100.00/ day Per Diem (late fee) to begin on intended close of escrow, to avoid the standard move investors pull to delay the close of escrow.
- We state in every counter that cash remains cash; no subject to's, no assumable deals, no hard money conversions, etc. Cash means cash so there's no delays or mishaps.
This typically makes a few walk away and we want that, as they would have pulled the nonsense moves that delay or kill deals. Now if they delay, my seller makes $100.00 per day. One of my sellers made $1,200.00 extra this summer because of my per diem clause. Another that panicked and said "remove the per diem from the counter" lost out on $500.00 when the investor delayed close of escrow 5 days without cause...he did it just to do it. GRRRRRR.
I've shared some of the ways I've sorted and qualified my multiple offers to find the dedicated and the serious vs. the poor intentioned and uncommitted. I have an excellent success rate with this: closing 74% of offer 1, 22% of back up offer #1, back up offer #2 3% of the time and only needing back up offer #3 with this method 1% of the time since I started tracking in 2011. My only regret is that I didn't track through the 2006-2011 depreciated market as I had a great track record with pre-foreclosures & foreclosures too, although more offers were needed often back then.
I also believe in and have used the Haus.com platform for multiple offers. It's cards on the table, but if you want an easier way to organize and counter multiple offers, I believe it's a very good tool for keeping you sane as a listing agent. Ultimately it's a better organized way for all parties to see what's going on, but removes the "poker" eliment from the negotiating. I feel this is OK when you are talking 3 or more offers because you only need one offer and the buyers will trust the hype more, because they see you are truthful in the amount of offers and offer spreads. Buyers will go into E-bay mode and bid themselves up. I hyperlinked a blog post I did on it above and both Sarah Ham & Michelle Volz here on AR can comment more on your concerns with this.
Please tell me a technique you use that differs from min in your comments,
I'd enjoy learning from your experience too!