You’ve worked hard to get your home to market, and you’re finally reaping the reward of all that effort. But instead of just a single, great offer, you’ve got several to choose between. This is a common situation in seller’s markets across the country, and one you, too, may be facing. How do you pick the right offer out of a stack of contenders?
- What Situations Prompt Multiple Offers?
With only 2.1 months of existing housing supply available nationwide, according to the U.S. News Housing Market Index, there simply aren’t enough good homes for buyers to not have to compete with one another. A balanced market, where there is considered to be an equal number of buyers and sellers, has around six months of supply. Such low inventory creates the ideal conditions for sellers to receive multiple offers. Of course, some areas are going to be much more competitive than others, but the circumstances that generate multiple offer situations are pretty consistent across the country.
Still, high mortgage rates are keeping some potential buyers on the sidelines. In May 2023, on average, the number of homes sold was down 16.8% year over year, according to Redfin, with 493,5123 homes sold in May this year, down from the 592,347 homes sold in May last year.
Mortgage rates ticked up slightly as of June 15, with the average 30-year fixed rate increasing to 7.14% from 7.11% the week before. Most fixed and adjustable rates crept higher or stayed about the same as a week ago. Mortgage interest rates are widely expected to fall through 2023 but have remained elevated during the spring homebuying season.
“There are various circumstances that are more likely to generate this situation,” says Adie Kriegstein, real estate agent at Compass Real Estate in New York City. “High demand and low inventory is the number one way this occurs. When there are more buyers than homes available, competition increases. Homes that are priced competitively, in desirable locations and in good condition are more likely to attract multiple offers. Also, a unique or rare home can also cause more interest.”
Should You Consider a Letter From the Potential Buyer?
It’s become a bit of a trend that buyers submit letters to the sellers of homes they believe will have multiple offers to try to sway the seller to their side. Although the idea is sweet on the surface, it’s not a great way to help you eliminate offers because you can easily run afoul of housing discrimination laws when selecting a buyer.
“I strongly discourage these, and if a buyer insists, I explain that they really can’t tell (the seller) anything about themselves that reveals traits that violate fair housing laws, which means there is not much to them at that point,” says Christa Ross, real estate agent at RE/MAX Select Realty in Pittsburgh. “On my listings, I specifically ask that (letters) not be included with an offer. Letters seem like something that the internet recommends to buyers, which is a terrible idea in practice.”
What Do Sellers Do With Multiple Offers?
If you’re facing down a multiple offer situation, don’t panic. Your agent will have the experience to help you through the process. Depending on your state, you may have the options to accept the best offer, make a counteroffer on the offer you believe is the closest to the terms you prefer, or make a counteroffer on multiple offers you’ve received (this is not possible in all states, ask your agent if this is something you’re considering).
If you’re in a state where multiple counteroffers are possible, you may receive multiple offers back again, or even have multiple acceptances. You’ll have to decide at that point which offer is right for you. Once you’ve committed to a buyer, that’s it, you’re ready to start your real estate transaction and sell your home.
Does the Highest Offer Always Win?
Real estate contracts have a lot of moving parts, and much of the time, you’ll face juggling the merits of different offers with varying additional conditions from your potential buyers. These can include anything from financing contingencies to the date when the buyer might want to close the deal.
“Conditions in a housing contract can be all over the map sometimes, but ones that you can usually expect to see are: inspection periods, timeline of the withdrawal to get the earnest deposit, who is paying for a home warranty, who is paying for the appraisal, and close of escrow date,” says Bryson Taggart, Opendoor agent in Phoenix. “While conditions aren’t always the same, they all do have to be figured out and agreed upon to make the contract valid.”
Everyone has heard the saying “cash is king,” but it’s not always true in a real estate transaction. Even though a cash transaction might cut out a lot of potential contingencies, it isn’t automatically better than a contract with some basic, reasonable conditions from the buyer.
“A cash offer may not always be the best, as occasionally a cash offer will come in lower than the homeowners want,” says Maureen McDermut, real estate agent with Sotheby’s International in Montecito, California. “Also, the seller’s schedule may dictate which offers they consider. If they are on a tight timetable, then a cash offer might be the best option, but if they have time, they may end up with a better offer that is financed via conventional mortgage or FHA or VA loans.”
Elements of a Great Offer
Real estate professionals agree that the best offer is the one that’s best for you, but it’s difficult to apply advice if you don’t have much experience selling homes. So, before you even put your house on the market, imagine what an ideal contract might look like for you. For example, do you need extra time to pack and move? A later closing date might be important in that case. Or, if you’re selling a home you’ve inherited and don’t know much about, you might not want to be on the hook for repairs.
“Priority should always be given to the offer that meets the seller’s needs and wants, and also those that aren’t going to fall apart through the process,” says McDermut. “If (you have) a need to move quickly, cash offers will be those that are prioritized. However, there may be stronger offers, so if you are seeking the best offer in terms of the amount offered, then a conventional mortgage offer might be considered above a cash offer that is at or below asking price.”
If you’re not in a hurry to sell, or don’t need someone who will take your property as it sits, meaning you can accept a financed offer, your ultimate decision comes down to how much money a contract will bring to you and whether or not the transaction is likely to close at all. Remember, in a multiple offer situation, you generally choose the contract that’s in front of you, there’s rarely negotiation that happens like with a solitary offer.
“A key factor in determining between multiple offers is net cash: If net cash is similar, which offer brings the least amount of risk to the transaction?” says Taggart.
Should You Consider a Contingency Contract?
The likelihood a contract closes is a huge consideration, and the bigger the contingencies, the greater the risk to the contract. You may find yourself faced with a contract that’s great on the surface, but with a buyer who needs to sell their home before they can buy yours. While this can work out, you’re shouldering an increased risk.
“Accepting a contingent contract comes with risks,” says Kriegstein. “This means that the sale of one’s home becomes dependent on the sale of another property, which may take longer than expected or fall through entirely.”
This can delay the sale and potentially cause the seller to miss out on other potential buyers who are not contingent on the sale of another property. “Keep in mind once you have a signed contract, you have to change the status of your home online so buyers would be unlikely to see your home as an option for them, since it won’t be listed as active,” Kriegstein says.
If your market is active and houses are moving fast, it might be worth it to accept a contract that is contingent on another home selling, but you’ll want to make sure the buyer is sweetening the pot to make your risk worthwhile.
“A home sale contingency tends to get rejected pretty quickly unless there is something else about the offer that makes it more attractive,” says Ross. “The price will matter. If the seller is making more money on the house, they may be more willing to take on the risk with the contingencies.”
Having multiple offers on your home can be a dream come true, if most of them are pretty good. Choosing the right offer means you’ll be able to move on to the next story in your life with fewer headaches and more cash in your pocket.
Source: realestate.usnews.com ~ By Kristi Waterworth ~ Image: Canva Pro