Multiple Offers: What does it all mean?
Wether you’re buying or selling, if you’re active in the market at some point you’ve probably come across a multiple offer situation, or what is commonly referred to as a “bidding war”. Multiple offer situations occur all the time in a variety of different markets, so it is important that buyers and sellers understand what this situation actually means for them.
What is a multiple offer situation?
It is pretty much exactly what it sounds like - a multiple offer situation is when one property receives two or (sometimes many more) offers in a short period of time, giving the seller the freedom to choose which offer they would like to proceed with.
Is it really a bidding war?
Despite the commonly used term “bidding war", multiple offers are actually for the most part designed to be as fair and confidential as possible and are actually more of a “blind bid” situation. The details of each offer are kept confidential, so as to limit any “up-bidding” situations. If there are competing offers on the table, either every buyer must be informed of the situation, or all buyers must be unaware, in order to keep an even playing field for all involved.
What to expect:
Buyers are expected to bring their best offer forward, with no knowledge of the details of the other offers from competing buyers. This generally results in a slew of offers coming in all over the place from well under list price, to list price, to many thousands of dollars over list price. A property with two offers could sell for $50,000 over the asking price, or we could see five or more offers and a home go for list price - there is really no accurate way to predict the selling price in a multiple offer.
Is the seller obligated to accept an offer if there are multiple offers?
The seller is not obligated to accept anything just because they are in a multiple offer situation. If none of the offers are what they are looking for, they have the right to turn them all down. This rarely happens however, more typically we see sellers start negotiations if none of the offers are acceptable. Important to note - once there are multiple offers on the table, the seller must pick one offer to work with - and can only negotiate one offer at a time. This means that the seller cannot counter all offers at once.
When do multiple offer situations occur?
Multiple offers can happen anywhere, anytime, even in slower markets. We have seen multiple offers in the worst of downturns, and the best of hot markets - the difference is the frequency at which we experience them. Most often, multiple offer situations occur when there is limited inventory available in a certain area and price point. If demand exceeds supply, then multiple offers become more common. Similarly, if a home is priced well below market, then the odds of multiple offers rises substantially.
What do multiple offers mean for sellers?
When multiple offers are presented on a property, the seller has a position of power in negotiations. Obtaining multiple offers usually means there is a strong demand for the property, and that the seller has a higher ability to dictate the terms of sale. Sometimes multiple offers are the result of the property being underpriced (whether that be intentional or not) but generally, it is due to perfect pricing and/or low supply in a certain area or price point.
What does it mean for buyers?
The reality for buyers competing in a multiple offer situation is that the property is in high demand, and a serious offer must be made. There is often only one chance with a multiple offer situation - meaning buyers need to put their best foot forward when they present their offer.
I am a buyer in a multiple offer situation, what should I do to increase my odds of acceptance?
For the highest chance of success, try to remove as many unnecessary requests to make your offer as clean as possible. Ensure your deposit is strong and your conditions are reasonable and will be removed as quickly as possible. Make sure that you come in with your “best” price, as you will only have one chance to be presented alongside the other offers. In our experience, it can also be super beneficial to preface an offer with an introduction letter of sorts containing information on yourself and why you love the house - this is especially relevant if it is a family that is selling their family home and wants to see it go to the “right buyer”.
Any other advice?
Given the blind bidding of a multiple offer, it can be extremely difficult to decide at what price to come in at. The best advice we can give is this - make sure that the number you offer will give you peace whether your offer is accepted or not. What this means is that if you lose out, you are at least satisfied that you did your best and gave it your best shot. On the flip side, if you win out - then you need to be ok knowing that you likely made the highest offer and that it may have been significantly more than the next best one at the table.
Navigating the buying process can be tricky and we always recommend the help of a professional. If you have any questions about buying or selling your property, give us a call! We would be happy to discuss how we can help.