The real estate business works on a system not unlike an auction. What that means is that multiple people can make offers on the same property. Regardless if you are a new home buyer or are an investor purchasing multiple properties a year, you will eventually run into a multiple offer scenario. There are many different types of situations that are possible regarding multiple offers, but a couple of common ones come to mind including:
- Multiple offers right off the bat: When you first put your offer in, there is already at least one other offer.
- Once your offer is in and countered by the seller, an additional offer is brought to the table by someone else.
Please keep in mind that there are not many hard and fast rules to buying real estate, and almost everything is negotiable. One of the most important things to do when in a stressful situation regarding your real estate purchase (or at least the attempt) is to keep calm and think your options through. The advice I am giving here is the same advice I would give to a client in a similar situation, but each situation is different. With that said, I’ll jump into two of the most common scenarios.
Multiple offers right off the bat.
This situation is probably the most common multiple offer scenario out there, and coincidentally, the easiest deal with. A multiple offer right off the bat is when your agent talks with the listing agent and they let you know that there is at least one more offer already on the property. Do NOT let that dissuade you from looking at the property if it feels like a good fit for you! The easiest way to deal with that situation is to ask yourself two questions: How much do you want this property, and what is the maximum amount of money you are willing to pay for that property? This is called the “highest and best” approach, where you make your highest and best offer, in hopes that someone else’s highest and best is lower than yours. After a couple of days, the listing agent will notify your agent if your offer won as highest and best or not.
It’s important to remember that there will always be another house that you will fall in love with. It’s okay to get attached to properties, just try to keep in mind that if it falls through, there will be more.
Once your offer is in and countered by the seller, an additional offer is brought to the table by someone else.
So you just received a counter offer from the seller and you are thinking about it for a day, when you get a call from your agent telling you that they were told there is another offer on the table. It’s very easy to get frustrated and want to throw in the towel at this point. Most times, you don’t know what the other offer (or offers) are, and you will have to make some quick decisions. The question at this point is the same as the last situation, “What is this property worth to you?” Once you ask that question, you have two main options.
Your first option is to accept the seller’s counter, get the house under contract and deal with the problems you have with the house later in the transaction (inspection period, financing contingencies, etc.). This works because since the sellers have sent a counter offer to you already and you accept, they are bound to it! Yes, you are accepting their counter offer and any terms they have regarding that offer, but that puts you in first position in the contract, and you can renegotiate in the inspection period for price or for things that need fixing in the house. Note: Ask your real estate agent about due diligence contingencies vs a normal inspection contingency.
Your second option is to send an additional counter to the sellers to try and get your terms and price. This option will allow them to reject your offer if a different offer is stronger, or they may come back with a highest and best scenario, and you’re in the same situation as the original example. Ideally, if this is your dream house, the house you CANNOT live without… I would not take this option, but it depends on you, your situation and finances, and any issues you may have with the house or offer on the table.
Hopefully you will go your whole life buying and selling real estate on a schedule that is comfortable to you and never run into these situations as a buyer, but more realistically, you will have to deal with them at some point. My best advice to you is talk to your real estate agent and come up with a solid plan to carry out, then stick to it!