How do multiple offers work in real estate? When you have various buyers who are interested in your property, you shouldn’t just assume that the highest dollar amount is the one you should take. There are other factors to consider, including:
- Financing vs. cash
- Closing costs
- Earnest money
When it comes to how to sell your house, the dream scenario is to get multiple offers on your home—that is, not just one interested buyer but a number of them! Getting multiple offers can be fortuitous, but it can also be a little overwhelming. Simply put, it can be challenging to weigh all the different factors and determine which offer is the best.
Of course, you probably know the old real estate proverb: Your first offer is usually your best offer. That doesn’t mean you always have to take the first offer, but you should always strongly consider it. Remember, every day your house remains on the market, it loses a little bit of its luster. Taking that first offer can be smart even if it’s a little below what you’d hoped for.
Also, note that there is always room for negotiation—even on that first offer! Indeed, buyers typically anticipate a counteroffer, and may, in fact, be lowballing you right out of the gate. You should always attempt to work with the buyer to arrive at a number you both feel good about.
Something else to note: Price isn’t everything. Some buyers may not be pre-approved for a mortgage. Some may be willing to forgo an inspection contingency. Some are prepared to put up a larger sum of earnest money. All of these are factors to bear in mind.
Meanwhile, buyers who make things complicated or have a number of stipulations may not be worth the trouble—even if they do happen to offer the highest dollar amount.
How Do Multiple Offers Work in Real Estate?
As we consider how to sell your house when you have multiple offers on the table, let’s look at some of these issues individually.
Buyers are asked to put forth some “earnest money” to prove that they are serious about buying the house—and while a larger sum won’t change your bottom line, it does show that the buyer is really committed to making the deal work. All else being equal, the buyer who offers more earnest money is usually the one you’ll want to go with.
The Stress of Multiple Offers
Something else to consider is that fielding multiple offers can lead to some complicated and frankly stressful negotiations—not least because there is always the chance that each interested party could walk away! One way you can avoid this scenario is to let all interested buyers know that you have multiple offers on the table and to ask them to put forth their best and final offer.
Something else you should ask yourself: How does each buyer intend to pay for the home? An all-cash offer is ideal, but such offers are not especially common. If everyone who put in an offer is also seeking a mortgage, ask them if they are pre-approved. Pre-approval can significantly expedite the mortgage underwriting process and minimize the risk of financing hiccups. The pre-approved offer is always going to be preferable to the non-pre-approved.
You should also take into account contingencies, which are kind of like a “get out of jail free” card for the buyer—a chance for them to change their minds should some unforeseen issue arise. As a seller, you naturally want to see a few of these contingencies as possible; thankfully, most can be avoided.
One contingency is that the buyer says they will purchase your home, but only after they sell theirs. You may want to accept this, especially in a slow market, but always put a timeframe on it—say, 30 days.
There’s also the inspection contingency, which gives the buyer a timeframe to have the house inspected and to back out of the deal if they find anything troubling. This is actually a very normal and prudent request and one you should allow for—most of the time. In a scenario with multiple offers, you may have a buyer who forgoes this contingency, which can save you some time and hassle.
For buyers who are taking out loans, another necessary contingency may be for a financial appraisal—and frankly, there’s not much you can do about this one, as the lender itself typically requires it. Generally, homes appraise for right around the sales price, maybe even a little more. If the appraisal comes in low, and you’re in the middle of a bidding war, you have just a few options:
- Come down on the price
- Contest the appraisal, and try to get a second opinion (which may or may not be in your favor)
- Let the deal fall apart
Something else to consider in terms of selling your house: Closing costs. Usually, the seller pays for a lot of the closing costs, including real estate commissions, but buyers may also end up pitching in. In a situation where you have multiple bidders, one buyer may offer to pay more of the closing costs than others—and that’s definitely something to weigh.
How to Sell Your House (and Choose the Right Offer)
Ultimately, you want to make the most informed decision you can, and to pick the offer that’s most valuable. One thing that can help is getting a report from Sold.com, which can provide you with some real numbers to work with as you size up potential opportunities. Get your free report today when you visit Sold.com!