With the supply of home for sale down to levels not seen since 2003 and months supply of inventory at 3.8 months we are officially in a seller's market. That means it should come as no surprise that multiple offers and bidding wars are again commonplace in our market.
Exactly how the situation is handled when more than one buyer submits an offer to purchase a property can vary from case to case because there are no set guidelines. The seller doesn't even legally have to let buyers know there are multiple offers, but they usually do because that most often results in the best price and terms for the seller.
Highest and Best Offers
Banks owning foreclosed properties typically put out a call for 'Highest and Best' offers due by a certain date and time once they have received more than one offer on a property. This serves as a notice to all buyers interested in the property that there are multiple offers and gives them an opportunity to revise their offers if they so choose. This practice has become more commonplace in traditional sales as well.
Terms that make an offer more attractive could include not only price, but also closing date and type of financing or other terms important to the seller. Many first-time buyers find themselves losing out to cash buyers, which can be a real plus to the seller especially if the winning bid is signficantly over list price… with cash, there are no worries about the property appraising for the sale price unless the buyer specifies that condition as part of the purchase agreement.
Counter Offers
Although multiple offers are usually reviewed all at one time, since there are no rules it is up to the seller how they are handled. Sometimes a buyer may submit an offer with a clause that will raise their price to 'x' amount over any other written offer, usually to a maximum price. Not all sellers like this approach, however, and it can backfire.
What most often happens is the seller chooses the offer which is best for their situation. However, it sometimes happens that a seller prefers most of the terms of one offer over the other offers but isn't willing to accept it as is… and chooses to negotiate with that buyer first by presenting a counter offer. If they don't come to an agreement the seller may then move on to other offers until coming to an agreement… or not.
Yes, although it doesn't usually happen it is possible to have multiple offers and still not come to an agreement!
Sharlene Hensrud, RE/MAX Results – Email – Minneapolis-St. Paul Realtor
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