So often you hear, “My house sold with multiple offers, over asking, within the first week!” That sounds impressive – but what does it really mean?
The following answers that question and more.
Q: What does “multiple offers” mean?
A: When sellers offer a house for sale, buyers will submit offers to purchase. If the sellers agree to the terms of an offer and both buyer and seller sign the offer, it becomes a legally binding contract to purchase the house. If more than one potential buyer submits an offer to the sellers, they have created a multiple-offer situation.
Q: When the sellers receive multiple offers on their property, how do they decide which one to accept?
A: The best one, of course. But which is best? It isn’t always the highest purchase price. The best offer is the one with a combination of all the best things.
Contingencies are great for buyer protection, but sellers often don’t like them because they give a buyer the potential to cancel the contract later on after all the enthusiasm for a new listing has faded. So, an offer with lots of contingencies, even with a high offer price, might not be a good offer. Maybe the buyers have to sell their house first, which could delay the process. The buyers might not be able to close for 60 or 90 days, which would increase the sellers’ carrying costs. The buyers might request that the sellers make some repairs or repair termite damage, which could be costly. The buyers’ lender could be from out of the area and might not be aware of the local market, which could cause problems. The agent representing the buyers might have a poor reputation or may not have counseled the buyers properly in advance, which could cause problems.
Bottom line: The highest offer isn’t always the best.
Q: What if two or more offers are really close in terms and conditions?
A: Sellers can counter any or all of the offers they receive. They accept an offer subject to the terms of a counteroffer. They can counter each offer with the same or different terms. Sometimes sellers will counter on only price or only terms, or both. This is where the negotiation process comes into play. If there is just one counteroffer, and if the buyers accept the new terms by signing, they have a ratified contract. If there are multiple counteroffers, a ratified contract is not created until the sellers accept one of the multiple counteroffers.
Q: It sounds like the sellers really have a lot of power and control over the transaction. Is that fair?
A: It is definitely a sellers’ market right now in that sellers pretty much get to make the rules. Just remember that a sale will only happen when a ready, able and willing buyer agrees on a price with a seller.
Owen Halliday is a longtime Los Altos resident and realtor who manages the Sereno office in downtown Los Altos. Email him at Owen@Sereno.com. For more information, call 492-0062.