They Are Back...Multiple Offers Dominating Market
With shrinking inventory and a dwindling supply of lower to mid priced homes, multiple offers are emerging. Lately, my standard response to my Buyer Clients has been, “the property has received multiple offers and the Seller is only accepting highest & best
.” A multiple offer situation arises when several, competing Buyers submit offers to purchase the same property. Generally, the listing agent notifies all parties of a multiple offer situation and provides a deadline to respond with their highest and best offer. If the Seller is a bank, the 'highest and best' notice you receive is designed to prod Buyers to re-evaluate their offers, separating the wheat from the chafe. If the first offer is on the low side, it's a reminder that the Buyer is competing against others, and they should submit their highest offer. The Buyer will have three options in response to the Seller’s highest and best notice: (1.) Rescind their offer; (2.) Continue with their current offer; or (3.) Increase or improve their offer.
Many buyers are willing to move on to the next property once they have been notified there are multiple buyers. In lieu of rescinding their offer, I typically encourage my Buyers to at least keep their current offer in place. Insufficient market comparables or the Buyer’s inability to obtain additional financing may prevent Buyers from improving their current offer. When considering the option of improving or increasing their offer, I recommend that the Buyer do not spend too much energy on trying to determine what is going on with the other offers. If the market comparables support your bid, in many instances, the simple answer is asking yourself “what is it worth to me?” If you love the property, keep moving forward, but at your own pace. Make the offer you’re comfortable with and don’t feel pressured to compete. Once all offers have been submitted by the predetermined date and time, the Seller will consider each offer individually, specifically the terms such as cash funds, sales price at or above list price, Conventional vs. FHA financing, contingencies, Seller contributions and escrow.
Since the Buyers have submitted their highest and best, the Seller typically will not counter, as they expect this to be your final offer.
It is common for some Lenders and Sellers to resort to ‘drama pricing’ to generate higher sales price. Drama pricing is a tactic that sets the list price below market value in hopes to generate a bidding war that drives up the sales price. This type of pricing should be easily identified by an experienced Realtor who is familiar with the local market. If a property is dramatically priced, in an effort to avoid frustration, be prepared for multiple offers and predetermine your best offer.
The market is improving and as a result, multiple offers will be routine for quite some time. Remember, reviewing market comparables with your Realtor and bidding accordingly will help to secure your position. Understanding your options in a multiple offer situation will provide you with the education and confidence to respond with the offer decision that is best for you. For additional information, please feel free to contact me at your convenience.