Multiple Offers – how sellers see it!
What type of offer would a seller most likely accept in a multiple offer bidding war? This is the only type of offer, provided the seller is making an intelligent decision and the deciding process is not under undue influence, or provided that the Realtor representing the seller is experienced and knows how to handle the multiple offers or bidding wars – the one with no conditions and most reasonable price (often not the highest price if the highest price offer has conditions).
Why would a seller accept a lower offer when it comes to price?
You must understand the seller’s logic. If the seller has 2 or more offers on the table, it is generally because the seller or the realtor has decided to hold off offers until a certain date, thus ensuring that all offers will be submitted at the same time. This in turns creates a perfect situation for a bidding war.
Before we go any further in a multiple offer situation, you must understand this as well – seller can only accept ONE offer or can Sign Back a COUNTER offer to only one buyer.
The only time the seller can ask for all buyers to increase the price is BEFORE the seller decides to accept or sign back an offer to on buyer. (You may think this is OBVIOUS but I have witnessed many times over a last few years and as recent as a month ago, where an incompetent Realtor sends all competing offers without asking for an increase and then signs back with a greater price after everyone else has left – why would we agree to a greater price after they just sent the competition home). The moment all offers are on the table in front of the seller, is the time when the Realtor representing the seller should go back to ALL realtors and give all of them their offers back and tell them that the seller has decided to work with all offers or a few selected ones and then ask for those selected to IMPROVE their offers. Often, the seller’s realtor will be more specific and tell buyers’ representatives to reduce conditions or increase price. This is when you, the buyer would know put the best offer forward and hope that the Seller accept your proposal. The price negotiations are more or less DONE at this point, (some adjustments may be made if there is a further sign back for closing dates and inclusions, but generally the price will be established at this point), and short of minor adjustments in a potential sign back yo will have won the bidding war.
But why did you win?
What was the seller thinking? From the seller’s perspective, when they looked at the multiple offers presented at the deadline, there may have been some offers 2-5% lower than asking price and some lowball offers (very low, usually 25-30% below asking price) – this is how you know who does not have a clue about real estate. There will also be some offers that were below asking price by only $1,000 or $2,000, some offers over the asking price, and some exceptionally high offers. The first group, with offers 2-5% lower than asking price and lowball offers will automatically be rejected in seller’s mind (although not necessarily officially, because you can still use them as leverage against good offers) an the seller will then focus on the conditions in the offers of the last 3 groups (offers that were below asking price by only $1,000 or $2,000, offers over the asking price, and exceptionally high offers). The winner in ALMOST ALL CASES no matter what the price is will be the one offer that has NO CONDITIONS. If there are more than one offer with NO CONDITIONS, only then will the seller look at the price.
Because a “bird in the hand…” is better. Although in the multiple offer situation, the offers with significantly better prices but financing or inspection conditions are tempting, unless the seller can somehow know 100% with certainty that they will remove those conditions, the seller could end up with a huge mistake when the buyer decides later to walk away from an offer because they either did not have the financing approved or the property did not pass t eh inspection. This is why the seller will take less money but a firm offer. The deal is FIRM at the point of acceptance or the seller may sign back for some inclusions or minor changes but will generally agree and accept on the spot the offer without conditions. Main reason, because they will get the multiple offer BIDDING WAR situation ONLY ONCE and tis is the only chance to benefit from it. If they accept an offer with more money but with conditions that then falls apart, it is vey likely they may not get any other offers, or at least any comparable offers and the other bidders may no longer be interested, so the seller will take an offer that is FIRM. Read my article on Real Estate Bidding War, How To, and learn how to make a firm offer by eliminating financing and inspection BEFORE the offer is submitted.