Are you looking for advice on what to do with multiple offers on your house? This is more common than many think in a hot market and being able to choose the best offer with the best outcome is not always as easy as one may think.
If I asked 10 sellers what offer they would immediately choose in a bidding war, 9 of them would say the one that’s the highest price but here’s some questions you need to ask:
- Will the house appraise for the offer being made?
- How many contingencies (inspections, appraisal, mortgage) are in the offer?
- Is there a home sale contingency?
- Can the buyer afford the offer?
- Does the offer work for your timing?
Let’s look at these one at a time to see if the highest price is still the most important for you.
Will the house appraise for the offer being made?
When you first met with your realtor, you both agreed on a price that was based on similar houses being sold in your area. You decided on a marketing strategy (what price to list at) based on condition, location and a few other factors. Now your house received several offers that are higher than any other house that has sold in the area. What happens if you get halfway through the transaction only to find out that your house appraised for $25,000 less than the offer? Was it really the best one then?
How many contingencies (inspections, appraisal, mortgage) are in the offer?
Sometimes a buyer feels very comfortable offering a higher price up front because they have a number of contingencies to protect them throughout the transaction. Maybe they plan on asking for a credit after the inspection or they made the mortgage contingency so tight that if the lender charges even one point they can walk away. Always consider what else is in the offer.
Is there a home sale contingency?
Someone may feel inclined to offer you a better price because they have a really big favor to ask. “Will you please wait for my house to sell before we settle yours?” Oh and if it falls apart, through no fault of your own, we get to walk away and get our deposit back. That’s potentially what a home sale contingency means for you and it needs strong consideration before accepting, no matter how attractive the price is.
Can the buyer afford the offer?
This is an interesting concept but one that needs strong consideration. You want a buyer that can afford your house comfortably. There is a standard clause in the PA Agreement of Sale that is called “Change in Buyer’s Financial Status”. This clause protects the buyer in case of, but not limited to, a loss of employment, a new financial obligation or a judgement entered against them. So you want to make sure that the offer you’re considering is by a strong buyer that isn’t going to be able to use this clause if they have to have a cavity filled.
Does the offer work for your timing?
You have to consider your own motivation to sell when accepting an offer. If you’re trying to buy another house or move for a job, an offer that doesn’t work for your timing could be more costly to you and your family than taking a lower offer that hits your timing goals. Don’t sacrifice your goals just to make a bit more money!
How to Handle the Offers when They come in
There are a few options that you have when you begin receiving offers.
- You can ask for all of the buyers to come back with their “Best and Final” offer by a set date and time.
- Your listing agent is not allowed to disclose what the competing offers are to the other agents UNLESS they are instructed to do so by the seller. This can give an opportunity to a particular buyer that is checking most of the boxes.
- Set terms with the competing offers for their “Best and Final”. You can request certain terms and favor those that are willing to offer them. This can be a closing date, deposits, inspection terms or a price.
- Just because you have multiple offers doesn’t mean you have to take any of these steps. If there’s a clear winner and it offers everything you want, don’t miss an opportunity!
What NOT to do with Multiple Offers
When you have multiple offers, you can start to get a bit power crazy and this can lead to making bad decisions. Even when you have a few offers, the buyers that are making every effort to purchase your home deserve prompt communication and decisions.
One of the worst offenses is to drag the process out over too long of a period. Once you’ve made the decision to ask for “Best and Final”, make that date within the next few days. If you wait too long, some buyers may choose to pull their offers and go after a secondary and more sure house to bid on.
Finally, don’t try to use a worse offer to get an already good one to be better. This can leave you in a tough spot if your bluff gets called.
How to create a bidding war is another question altogether and savvy realtors and sellers out there understand that your starting price can be the key to maximizing your return and having a great listing experience!
Thinking of selling your home? I’m passionate about helping sellers get the most for their house and hitting their goals!
I service Philadelphia and its surrounding counties such as Montgomery, Delaware, Bucks and Chester counties. Call/text me at 267-825-1192 or email me at chris@chrishvostal.com.
