The hot spring residential market will soon be upon us. This year, it will almost certainly be hotter than anything in the recent (or distant) past for sellers. Available listings remain low (scarcity), new construction isn’t even close to keeping pace with first time buyers, more potential buyers are coming into the market (high demand), and interest rates remain near historic lows but show signs of soon heading higher. This is the most basic of market forces - supply and demand. In fact, the winter season never really even cooled off from last autumn. By almost every traditional measure, this spring could be a milestone for multiple offers.
Listing agents should be preparing to deal with sellers receiving multiple purchase offers.
Always keeping in mind that when a person is selling their largest asset, confusion and fear can set in for deals that are only executed a few times in a lifetime. When given multiple offers, probably the biggest obstacle for sellers need to navigate is the time limitation. Buyers may make a slightly above asking price offer but include a contingency that it be accepted in 24 or 48 hours in an effort to wrap the deal up before other offers come in.
The seller is probably thrilled to receive a full price or even slightly above asking price offer. But they have (or should have) reservations about accepting this offer in too short of time without adequately understanding on all of the terms of the offer or the possibility that even better offers might be in the wings. The seller turns to you as the listing agent for advice. What should you do?
As the listing agent, you may already be expecting multiple offers on the home and even have received calls from buyer agents informing you that an offer is in the making. Of course, there are several strategies that could be used. The seller could stall by sending out counter offers asking for even a higher price or to have unwanted contingencies removed. They may or may not allow sellers to see the best multiple offers before the counter offer is accepted.
One good strategy is avoiding this foot race from the beginning. To avoid confusion for the seller, you want to give your sellers time to receive and consider multiple offers. A good way to do this is by stating in the remarks section (or where appropriate in the listing) “All offers due 10 days from the list date by 5:00 pm. Beginning at this time, sellers have 5 additional days to review all offers.”
This gives both the sellers and multiple buyers’ ample time to carefully consider offers. Knowing that making the first offer is not an advantage, gives buyers’ time to take another walk through of the home before carefully deciding on the offer to make. Having the lag time between when offers are received and when sellers are expected to make a decision enables sellers to better understand which offer best meets their needs.
Again, selling a home is typically the largest financial decision a homeowner makes. They need a method to clearly perform a side-by-side comparison of multiple offers. Since most residential offers use a standard form, the side-by-side comparison isn’t difficult to complete. In fact, this past December, the California Association of REALTORS® made available a Summary of Multiple Offers form (http://www.car.org/media/pdf/legal/standard-forms/1066822/). Some minor modifications might be needed to comply with your local regulations, purchase agreements, and or local markets but it is a good starting point. It covers the same eleven elements as a single-offer summary. The elements are: (1) purchase price, (2) initial deposit, (3) increased deposit, if any, (4) loan amount, (5) close of escrow date, (6) possession date, (7) removal date for loan contingency, (8) for appraisal contingency, (9) for buyer's inspection contingency, (10) sale of buyer's property contingency, if any, and (11) whether certain personal items are included in the sale.
This is a listing agent/seller confidential form. The completed form should not be made available to other agents. Additionally, this is not an all-inclusive form. Listing agents must make sellers aware that other information should be considered. For example, address the question of who is to pay for HOA documents and/or transfer fees. Or if the buyer requires a home warranty policy. You can either expand your basic comparison form as required or attach addendums when/if necessary.
This may be a little extra work for listing agents but it shows this is a great time to be in the profession.
Please leave a comment if this article was helpful or if you have a question.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.