Congratulations! You did something right if you have received multiple offers on your house.
Although this is a great opportunity to get your full list price or much more, this news is always received by my clients with a sense of shock. One or two offers is manageable, but five or more makes picking one very hard.
Over the years, I’ve had listings get eight, ten, and a frightening fifteen offers. Each home was priced right, but I credit these fantastic results to the committed preparation my clients did to appeal to the immediate pool of eager buyers.
Review each Offer
Although you might want your agent to tell you which offer is best, you owe it to each buyer to review their offer with your agent. This will give you an excellent overview of the terms of the contract, your obligations, and help you refine what your ideal negotiating terms are.
For example… the Closing date may be important because you’ll be out of town on certain dates. A buyer who wants to close in twenty one days may be perfect but may be asking for the impossible.
One recommendation that I give to my clients, when there are multiple offers in front of you, initial the top corner of each offer after you have reviewed it. Those initials are a physical reminder to you that you saw that offer.
Calculate your “Net”
The one figure you want to know right away is what your net proceeds will be after expenses. I like to calculate this figure for each offer, as best I can, and review those figures with my clients. Especially since that is what you’ll will walk away with after the Closing.
Apples to Apples, please
I like to summarize each offer so clients have an apples to apples comparison especially if there are more than two offers on the table.
Here are some key points in this negotiation:
- The Sales Price
- Ernest Money Deposit amount
- Pre-approval letter
- Settlement Date
- Contingencies – home inspection, appraisal, financing
- Coinciding settlement
- Escalation Addendums
- Special requirements
To simplify some of these common points, I feel it is smart to give specifics ahead of time to buyer agents with instructions such as “the seller prefers to close June 30th.” Be consistent up front if that is what you really need because it gives structure to the offers and then there are fewer points to negotiate.
Pre-approval letters from lenders
Ask your agent to reach out to the loan officer on any pre-approval letters to ask some questions that will help build confidence that your potential buyer will get final loan approval. I have found this to be very important when I’m not familiar with a lender who is outside the area, and very reassuring when I speak with a professional who is on the ball and has a track record with the clients over the years.
The Internet is full of financial writers who write articles on the real estate business. And these days, they write about Escalation Addendums even though, to me, they seem to have no experience sitting at the kitchen table negotiating, evaluating an escalation addendum or calculating one.
There are many factors when looking at an escalation addendum, and my tip is to see what the status is for an appraisal contingency.
The contracts that we use in the Vienna real estate market are written by the Realtor Association and their team of attorneys. But there is one gray area in these contract negotiations that, unless specifically added, is missing.
There isn’t a set “timeframe” to respond to an offer.
My recommendation is to respond after the first weekend that your home has been on the market. Let buyers know ahead of time that you’ll respond after noon on Tuesday or by Wednesday. Giving some context, expectation, and confidence to interested buyers that the playing field is level.
Let me caution you if you want to play games. Last year I did have some buyer clients who, after submitting their offer, felt that the slow seller response was due to the seller “shopping” their offer hoping to start a bidding war. So, they withdrew their offer feeling the seller wasn’t negotiating in good faith.
A few days later, they resubmitted a lower offer and got the home! Essentially, the seller had dropped the ball in the negotiation and ultimately netted less money.
So, take a lesson here that you need to respond quickly and “in good faith” when you have a strong offer in hand.
Is it confidence or highest price?
It is very important to negotiate the offer you have the most confidence in, which may not necessarily be the highest offer. This is the “x-factor” which will make your final decision hard, especially when two offers are nearly identical.
One “x-factor” is the detailed personal letters some buyers submit with their offer. They can torpedo a solid offer if they are poorly written and aren’t read exactly as the buyer intended. They are a pitch, yes, and shouldn’t have a manipulative tone.
For example, I worked with some buyers who had been working with another agent before me. They showed me previous offers along with a lengthy letter with photos of themselves. It really was too much, and when I had them submit a new offer, I included a brief summary of who they are… and they beat out three other offers.
I understand how people work these days, researching everything. After closing, I learned from the listing agent that the seller had read through my clients LinkedIn profiles and even found their wedding registry online.
As a final note, let me be clear, discrimination is illegal and I, and any Realtor, know it is against the law to participate in this behavior.
Your goal when looking at multiple offers, should be to negotiate an offer that will get the deal done, on time, at your price, with the fewest potential obstacles.