In a competitive market, multiple offers can be a buyer’s worst nightmare. The words multiple offers as a seller usually make homeowners dance around with glee – it’s the holy grail of home selling. The more offers, the better the seller can control the price and terms of the contract, typically getting top dollar for the home. Of course, the downside of multiple offers is that that means a lot of people have traipsed through your home recently, turning your normally quiet life at home a little upside down, but remember, we set out to sell your home and that’s exactly what we’re going to do.
We Received Multiple Offers – Now What?
The first step is to take a step back and breathe. It’s exciting to know you’ve received multiple offers, but we have a lot of work ahead of us, so take a moment and think about what it is that you’re trying to accomplish with selling your home. Do you need to be out fast and on your way to a new job in a new city? Are you looking to profit so you can roll that money into retirement or maybe a kid’s college fund? Are you looking to move up and buy a bigger home? All of these items help determine your motivation and what will become most important to you in the sale of your home. Know what matters most to you so you can find the offer that best suits your needs.
Determine a cut off date for offers so that any agents that are out there trying to write one up can get it turned in. Your agent can take that date and inform all parties that have submitted an offer (and those that have shown the home or expressed some interest) that they’ll need to turn in what’s known as “highest and best.” This puts the potential buyers and their agents on notice that they need to turn in a strong offer, because they are competing with others and they’ll want to be sure that the offer they’re making is their best offer with the best terms they can give. The buyer knows that this is not a time to lowball and try and negotiate – they need to put their offer in the best light possible in order to get it accepted.
Once you have all the highest and best offers, it’s time to dig into the terms of each one. We recommend creating a simple spreadsheet that outlines each offer and the basic terms such as price, earnest money, option period and fee, closing date, and any seller paid closing costs or other expenses (home warranties, surveys, title expenses). We also recommend including lender information and what type of loan (or cash) is going to be used. Round out the spreadsheet with a seller’s estimated net proceeds column so that you can see what the bottom line for you will be.
When looking at the spreadsheet, don’t just look at the price. The highest price may actually be the worst offer. The seller’s net proceeds are really what matter when it comes to looking at offers from a financial angle. You may be getting a high price, but in that same contract you may be paying more in closing costs or paying for things like home warranties or survey costs. Look at all those numbers as a whole to see what your net will be and you may find that a lower priced offer is actually the best for you if you’re looking to walk away with the most money. It all depends on the details of the offer.
Speaking of price, be prepared to have the talk with your agent about potential appraisal issues. If someone offers you too much and their appraisal doesn’t come in at that same value or higher, the whole contract may be in jeopardy. Some homebuyers will make high offers knowing full well the home will not appraise at that price – which gives them leverage to renegotiate the deal later down the road, because at that point they know that most people would rather just close and get it over with then lose weeks of time with the home off the market and going through the whole process again.
Other factors to look at include items like what kind of loan the buyers are looking at or who the lender is. Your agent can help advise you on this. There are some lenders that are notorious for delayed closings or not communicating well. Title companies can be an issue too. Look for a title company that your agent knows can get the job done and who will communicate with you to keep things flowing during the transaction. The actual work that title companies do (title searches, title insurance) may be the same, but the title industry is truly based in service and those that will work hard on that should never be overlooked or underappreciated.
Once you’ve made your decision, you agent will inform all parties and get the ball rolling on your contract. This is where the fun begins!
One word of advice – be prepared. Not all deals work out and as the home just went under contract there are still opportunities for the buyer to terminate the contract and walk away from the deal. The good news is that you know there is interest in your home and you should be able to find another buyer, but it can be disheartening when you got all excited only to have a buyer terminate on you. Hang in there and let’s focus on getting it under contract once again.
image courtesy of mRio