You see a house the day it come on the market, the buyer loves it and wants to make an offer and just as you call the listing agent to let them know your buyer is submitting an offer on the property they drop a bomb. The home has upwards of 22 showings, and there are already multiple offers in hand. The seller has set a highest and best deadline for all offers. It’s happening everywhere, not just in the Charleston metro. It can often be discouraging to a buyer, so we wanted to share some of the questions our buyers are asking us when they find themselves either facing a multiple offer situation or expecting to be in that situation. It always best to talk with your real estate professional though when encountering these types of situations.
Q: What exactly is a multiple offer situation?
A: A multiple offer situation occurs when a listing agent has received multiple offers to purchase from buyers on the same listing. It can be 2 offers or 6, it’s hard to tell exactly how many offers a property can expect and unless the listing agent and seller choose to share the information sometimes we won’t know how many contenders there actually are.
Q: We’ve heard sellers set a highest and best deadline, what is that?
A: Not all multiple offer situations will result in a highest and best deadline. The listing agent takes direction from the seller, so if the seller chooses to set a highest and best deadline here is what happens: A highest and best deadline is an opportunity for the buyer to do exactly what it sounds like- submit their highest and best offer for the property. A buyers final offer will be due by a certain time and date and after that deadline occurs the listing agent will sit down the seller to review offers and the seller will select the offer that is best for them.
Q: So does that mean whoever offers the most for the house will have their offer accepted by the seller?
A: Not necessarily. In some cases, yes. In some cases though, a seller might be more likely to choose a cash offer, an offer with no closing cost assistance, an offer not contingent on an appraisal, an offer with a very small due diligence period, or an offer that can close quick even if that buyer has offered a little bit less in terms of price. We can’t answer this question with 100% certainty though because it’s ultimately the sellers choice and each seller has a different situation and motivation for selling their home. It’s important to note though, that these types of contingencies (or lack of) might not make for the best situation for you as a buyer and that’s where your real estate agent can lend professional opinion as well as the pros and cons of these contingencies.
Q: Does a multiple offer situation mean the house will sell for more than list price?
A: Not always, but a lot of times that is the case. We’ve seen situations where a home has sold for $50,000 more than list price, $1,000 more than list price and everything in-between. Each home presents a totally unique situation. A lot of times a multiple offer situation will occur when a listing first comes on the market because it’s new and everyone is just seeing it for the first time, however sometimes two or more buyers will show interest in a home that has been on the market for a little while and it just so happens that there is more than one offer. In this situation, sometimes a home can still sell for less than list price.
Q: So, what do you suggest I offer?
A: As much as we want to answer this, we can’t! Here’s what we tell our buyers: offer what you feel comfortable with. If you’re comfortable going over the listing price by $2,000 then great, if you’re only comfortable with a full price offer then that’s fine too. We don’t want you to regret a decision, so it’s important to make sure you evaluate the comps that your real estate agent sends to you when determining your offer price. If we find our buyers in this situation we help to explain the comps, offer guidance, help you to make your offer strong in other areas (closing costs, due diligence, earnest money, etc.), and talk about pricing trends and market trends. In the end though, you, the buyer, have to be comfortable with your decision. We never want you to do something you’re not comfortable doing.
Q: We’re already at the top of budget, what can we do?
A: There are other ways to make your offer strong and to have it considered by a seller. If you’re a cash buyer that can be a strong position in itself, and with cash there is some additional flexibility as well (closing, due diligence, appraisal etc.). Again, removing some of these contingencies isn’t always the best answer though.
If you’re a buyer obtaining financing, making sure you have a solid pre approval letter with a current date stating the address and that your credit has been checked, employment verified, and so on. That alone can be a huge boost and give a seller more confidence in accepting an offer contingent on financing. We can also help you to make your inspection period as short as realistically possible and we can work with your lender to talk about quick closing time frames. When we get to this situation though, we are here to help and chat more in depth about these options and whether or not they make sense for your buying position.
Q: Is this happening at a certain price point?
A: Honestly, it’s happening at a variety of price points. There are some price points that are hotter than others and driving more offers than another. We’ve seen multiple offers under $300,000, from $400,000-$600,000 and over $1million. If a home is priced right and there are a lot of people looking in that price range then the odds of multiple offers happening is a good bet.
Q: Can we avoid this situation?
A: Homes that have been on the market for a while and have not gone under contract are less likely to have multiple offer situations, but even then we still see it happen. Being the first buyer to get an appointment isn’t necessarily going to give you a leg up either. Highest and best deadlines can sometimes give several days for buyers to go and view the home and then make an offer before the seller reviews any offer on the table. If new construction is an option for you, then this could be a good route to take that we can help you with that might be less likely to have multiple offer scenarios occur.