Sellers: How to Handle Multiple Offers
Westcoe Realtors, Riverside Ca…Spring is here, and with it comes a pretty active real estate market. There are a variety of reasons why this is so, from a reduced inventory (supply), to a desire for buyers to get the low home interest rates while before the Fed raises them again (demand). Whatever the cause, the result is that in some price ranges, sellers are experiencing multiple offers…which raises the question on how best to handle this situation.
Since we deal with this in our office on almost a daily basis, we thought a few helpful hints might make for a smooth negotiation if you ever find yourself in this enviable position.
Just remember…every situation is different, so use the following wisely depending on your price range, the number of offers, how long you have been for sale, and a host of other factors that you can discuss with your agent.
First, remember that “Pigs get fat, Hogs get slaughtered.” This is our way of saying that as a seller, don’t get cocky, and don’t get too greedy. The worst thing a seller can do is pit the buyers against each other to the point where things get stretched so tightly that the “rubber band” breaks. If you are not careful here, and come across as too greedy, the potential for the buyers to walk away, or worse yet, agree to your terms and then bail out later when they reconsider are pretty high. So…yes, you can stretch everyone a bit, but don’t just go crazy. Remember, you want all you can get, but you get nothing if the sale never closes.
Secondly, the highest offer is not always the best. Most of the time it is, but make sure you consider the terms of all the offers. If the highest price offer is a 95% loan (5% down payment) with a buyer with good but not great FICO scores (basically a credit score denoting how easy it will be for the buyer to qualify for the loan) vs. an all cash offer a few thousand dollars less, the all cash offer might have a far better chance of closing than the highest price one with the 95% loan. There is a lot that can go wrong with a new loan, especially one with very little as a down payment, so be careful here. Common sense goes a long way when considering which offer is best.
Thirdly, you can counter all or as many of the offers as you desire, and the counters can be different. Again, don’t go crazy, but there is no reason you cannot counter more than one offer, and since each offer has different terms, each counter might be different as well. Some you might counter with a higher price, and some with better terms, and some with a different close of escrow date, or all might contain the removal of some item the buyer wanted the seller to pay for (ie: home protection policy, termite report, etc.). Just remember rule #1 above and you will be OK.
Lastly, remember that each situation is different, and all of our rules above might not apply to your transaction! This is critically important to understand, because there are so many variables for each sale. Price range, how long you have been on the market, work the house needs done, termite reports and potential clearances, contingencies the buyer may have….and the list goes on. Here is where a good real estate agent can guide you on what is important, and what is mere window dressing.
In the end, all good negotiations should leave both parties feeling like they are relatively happy. Trying to squeeze the last ounce out of a buyer usually leaves them bitter at some later point…and sometimes this bitterness just gets too much for the buyer to swallow, and they walk away from the sale.
Remember…the goal is not to just sell the house, but to CLOSE the house as well…and if you leave a little on the table for the next guy, chances are you will accomplish both.
Take care, and as always, thanks for reading.