I feel like I’ve been slacking a bit on seller’s month, partially because I don’t want to jinx anything with my current sale by writing about what’s happening! But I’m going to write about something today that’s seen on both sides of the sales equation right now: multiple offers.
Everyone handles multiple offers differently, and there are many schools of thought around it. Whether you’re on the buy side or the sell side, you definitely want to work with an agent who knows how to conduct him or herself throughout the process. While you may feel you are equipped to handle this on your own, I don’t agree. Even a friend of mine who grew up in real estate ended up bringing an agent into the process to represent him when the issue of multiple bids came up. Someone who does this every day and is surrounded by others who are doing it as well is going to have more tools to get you the apartment, or select the best offer, than someone who doesn’t.
Let’s start basic and say there’s a property that has been on the market for two weeks, has had two open houses, and now it’s Tuesday. Multiple people have said that they will be submitting offers and are prepping their clients, and then the offers start to come in. As the listing agent it makes sense to tell everyone who has been circling that the first offer was received, as this can motivate others to act more quickly. But don’t LIE and say you have other offers in order to get someone to jump. That may work, but it could also backfire if someone “calls your bluff.” In general, I believe in being truthful throughout the transaction. Keeping it simple, let’s say that after 48 hours you have received three offers. At this point you have a few choices:
Keep accepting other offers and counter each individual offer (stall for time option if you don’t like any of the offers and think more will still trickle in)
Accept an offer (maybe someone went above ask and everyone else is really far back, and you just want to get a move on)
Go to a “best and final.” (three decent offers, and you want to give everyone a chance to give you their highest number by a set time so you can decide)
There are hybrids of these, like if one offer is significantly higher and you want to give the other two offers a chance to do a best and final before pushing the first bidder any more. And the whole thing is still tricky, even in a simple example, because you want to treat everyone fairly but at the same time your fiduciary duty is to your client. YOUR CLIENT is the one you owe your loyalty, so it can be an interesting balance.
This becomes way more complicated if one of the buyers is unrepresented, and is another reason I tell buyers they need to work with an agent. How is someone whose legal obligation is to the seller going to help you in an unbiased way during a bidding war? If the purchase of a property is straightforward or you want to try to use your lack of agent as leverage, be my guest, but on the listing side unrepresented buyers make me nervous. I don’t feel like I can do as good a job for them as I want to and still be loyal to my own client.
Once you’ve decided on the strongest offer — not always the highest number — that you think will go smoothly and end up passing the board (if necessary), you accept. At that point the listing agent should keep showing the apartment/holding open houses until contracts are signed, but should also be straightforward with people that there is an accepted offer. One of the other offers may be considered the backup option in case things start to break down with the initial one. But in my opinion, an accepted offer should always be honored.
However, the listing agent is also bound by law to present all incoming offers to the seller. Even if the agent tells everyone else that they are not accepting further offers, someone COULD, in theory, offer significantly more and if your seller wants to go with that offer, in the end it is up to them. It is a risky move that can always backfire and lead to both the original person walking away AND losing the second offer. Because it is not the same thing to get an offer and to get into contract. So as the agent you need to advise your client of the risks, but in the end, you work for them.
This is an area of real estate that I am still familiarizing myself with and becoming more comfortable. Honestly, it’s because the FAIR thing isn’t always the RIGHT thing for your client, and I have trouble separating my sense of justice from my obligation to my client. Thankfully I have had the luxury of working with amazing people who can advise me. Because the only “right answer” I can get on anything is what is legal; beyond that it’s knowing what usually leads to the best outcome for your client, what is best practice, and a general sense of how one should act that will result in the best outcome for everyone involved.