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Multiple Offers? What to Consider in a Seller's Market

Harcourts North America
August 27, 2021

The current real estate market is unlike anything we have seen before. To say it is a "seller's market" would be an understatement. The inventory of homes is at historic low levels, while there is a frenzy of qualified buyers looking to take advantage of the incredible interest rates that are available. It is a perfect storm for homeowners that are sitting on a property they are yearning to sell.

We have witnessed the demand to purchase becoming more and more prominent. With only a limited supply of homes, prices have rapidly increased, homes are selling faster, forcing buyers to compete for every property. So much action can result in multiple offers coming in from every angle. It can be challenging to keep your head above water and stay focused to receive the best possible price for your property or purchase the home of your dreams. Whether you are a seller or a buyer during this time in the housing market, it is essential to remain calm and consider your options to obtain the best possible outcome.

Sellers: An Influx of Offers

It is almost a foregone conclusion that you will experience multiple competing offers to acquire your home in a seller's market. When there is very little inventory on the market, it is not unusual for a seller to receive up to 20 offers or more. As a seller, you want to accept the highest price and the best terms for your property. Your real estate agent can help you achieve that through several negotiating tactics and options specific to your situation.

There are several ways in which sellers can deal with the multiple offers that come their way.

  • You can take the "best" offer in your own opinion.
  • You can notify all possible purchasers that other bids are negotiable or "on the table."
  • You can oppose one offer while placing other offers on hold while you await the conclusion on the counter-offer.
  • You can "counter" an offer while rejecting the others. The ball is in your court.

Be aware that each one of these resolutions has its benefits and disadvantages. Being patient might bring you a better offer down the line, but you also risk missing out on the true market value of your home. Reiterating to buyers to make the best offer possible may produce a better proposal, or it may discourage buyers who believe they have already made a fair offer culminating in ending negotiations to seek other properties. Just remember, when selecting the best offer, contemplate all factors involved, such as price, down payment, financing, contingencies, and unconventional requests.

Buyers: Competing with the Competition

When looking for a home during such a competitive time, you will want to analyze the dynamics of multiple offers and accept how this might affect your negotiating strategy. As a buyer, you want to purchase a home at the lowest possible price and on the most agreeable terms, but this might be difficult to achieve in a seller's market. So as a potential homebuyer, is it worth trying to compete against the onslaught of other buyers in a seller's market? If you find a property that is the perfect fit for you, it may be. What's the harm in putting in an offer? Somebody has to become that homeowner on the market, and why can't that be you?

There are various ways to prepare yourself for the upcoming scenarios you will find yourself in on your quest to outduel the competitors. By coming up with a plan to combat your rivals, you will stay one step ahead of the game. Here are some things to consider before you dive in headfirst.

  • Sellers might worry that once they commit to an offer, the chosen buyer could back out of the deal or neglect the contract, and by that time, the other buyers will have already moved on. By submitting a larger earnest money deposit, you'll establish that you are serious about closing the deal with the seller. It gives a clear impression that you are devoted to the sale by simply offering more money sooner rather than later.
  • Show the seller you are ready for such a significant transaction. By asking your mortgage lender for a loan pre-approval letter that shows how much they are willing to let you borrow, the seller will see how much stronger a candidate you are for the purchase.
  • You might want to think about minimizing or forgoing some contingencies that are in place if the sale was potentially going to happen. For example, you could shorten the period for a home inspection or waive a loan-approval contingency if your loan is sturdy. By talking to your agent about corresponding sales, you will know where you can ease up the process to move along the sale.
  • If there is a chance that the home might appraise at a lower price than your offer, you might propose to pay the difference in cash.
  • Finally, offer your highest price for the property without feeling uncomfortable about it down the line. Agents can help you determine the pricing range using comparative market analysis, and negotiations can go from there.

We are living in unprecedented times. The real estate industry has never experienced a market like this. With interest rates at an all-time low, a massive amount of motivated buyers, and a shortage of housing inventory, this is the definition of a seller's market. Whether you are a buyer or a seller, you are likely to witness multiple offers, so ensure that you have thought your strategy through before making or accepting a bid.