Post written by Chuck Braxton, REALTOR® GRI, Roche Realty Group, Inc.
Information for Buyers
In some situations sellers will have several competing purchase offers to consider. Sellers have several ways to deal with multiple offers. Sellers can accept the “best” offer; they can inform all potential purchasers that other offers are “on the table”; they can “counter” one offer while putting the other offers to the side awaiting a decision on the counter-offer; or they can “counter” one offer and reject the others.
While the listing agent can offer suggestions and advice, decisions about how offers will be presented—and dealt with—are made by the seller—not by the listing agent.
There are advantages and disadvantages to the various negotiating strategies buyers can employ in multiple offer situations. A low initial offer may result in buying the property you desire for less than the listed price—or it may result in another buyer’s higher offer being accepted. On the other hand, a full price offer may result in paying more than the seller might have required. In some cases there can be several full price offers competing for the seller’s attention—and acceptance.
The agent preparing your offer will explain the pros and cons of these (and possibly other) negotiating strategies. The decisions, however, are yours to make.
Purchase offers generally aren’t confidential. Sellers may authorize the listing agent to make other buyers aware that your offer is in hand and, in some cases, sellers may even disclose details about your offer to another buyer in hope of convincing that buyer to make a “better” offer. In some cases sellers will instruct the listing agent to disclose an offer to their buyers on their behalf.
Listing agents and buyer agents are required to follow lawful, ethical instructions from their clients. While some REALTORS® may be reluctant to disclose terms of offers, even at the direction of their clients, the Code of Ethics does not prohibit disclosure. In New Hampshire, state law or real estate regulations do not limit the ability of agents based on their client’s instructions to disclose the existence or terms of offers to third parties.
You may want to consider making your offer confidential, or establishing a confidentiality agreement between yourself and the seller prior to commencing negotiations. However, in a multiple offer situation, the seller and seller’s agent may not be willing to execute mutual confidentiality agreements.
Agents working with buyers are likely to have other clients or customers, some of whom may be interested in the same properties as you are. Of course, an agent representing buyers has a duty of confidentiality to each and every client. Ask how offers and counter offers will be presented and negotiated if more than one client or customer is trying to buy the same property.
Appreciate that the advice you receive is based on past experience and is no guarantee as to how any particular seller will act (or react) in a specific situation.
Information for Sellers
It’s possible you may be face with multiple competing offers to purchase your property. Your listing agent can explain the various negotiating strategies for you to consider. For example, you can accept the “best” offer; you can inform all potential purchasers that other offers are “on the table” and invite them to make their “best” offer; you can “counter” one offer while putting the other offers to the side awaiting a decision on your counter-offer; or you can “counter” one offer and reject the others.
If you have questions about the possibility of multiple offers and the way they can be dealt with, ask your listing agent to explain your options and alternatives.
Realize that each of these approaches has advantages and disadvantages. Patience may result in an even better offer being received; inviting buyers to make their “best” offers may produce an offer (or offers) better than those “on the table”—or may discourage buyers who feel they’ve already made a fair offer resulting in them breaking off negotiations to pursue other properties. Your listing agent can explain the pros and cons of these (and possibly other) negotiating strategies. The decisions, however, are yours to make.
Appreciate that your listing agent’s advice is based on past experience and is no guarantee about how any particular buyer will act (or react) in a specific situation.
Information for Buyers and Sellers
Perhaps no situation facing buyers or sellers is more potentially frustrating or fraught with potential for misunderstanding and for missed opportunity than presenting and negotiating multiple, competing offers to purchase the same property. Consider the following issues and dynamics:
- Sellers want to get the highest price and the best terms for their property.
- Buyers want to buy at the lowest price and on the most favorable terms.
- Listing agents—acting on behalf of sellers—represent sellers’ interests.
- Buyer agents represent the interests of their buyer clients.
- Will a seller disclosing information about one buyer’s offer make a second buyer more likely to make a full price offer? Or, will that second buyer pursue a different property?
- Will telling several buyers that each is being given a chance to make their “best offer” result in spirited competition for the seller’s property? Or, will it result in buyers looking elsewhere?
- What is fair? What is honest? Why isn’t there a single, simple way to deal with multiple competing offers?
Knowledgeable buyers and sellers realize that complex situations rarely have simple answers. However, understanding some fundamental principles can make negotiating multiple offers simpler.
Realize that the listing agent represents the seller—and the seller’s interests, and the buyer’s agent represents the buyer—and the buyer’s interests. Real estate professionals are subject to state real estate regulation and, if they are REALTORS®, to the Code of Ethics of the National Association of REALTORS®.
The Code of Ethics obligates REALTORS® to be honest with all parties; to present offers and counter-offers quickly and objectively; and to cooperate with other agents. Cooperation involves sharing of relevant, non-confidential information.
Frequently, frustration and misunderstanding results from cooperating agents being unaware of the status of offers they have presented on behalf of the buyers they are working with. Listing agents should make reasonable efforts to keep other agents working with buyers up-to-date on the status of offers. Similarly, agents working buyers should keep listing agents informed about the status of counter-offers their seller-clients have made.
Finally, buyers and sellers need to appreciate that in multiple offer situations only one offer will result in a sale; the other buyers will often be disappointed that their offers were not accepted. While little can be done to assuage that disappointment, fair and honest treatment throughout the offer and negotiation process, coupled with prompt, ongoing and open communication, can enhance the chances that all buyers—successful or not—will feel that they were treated fairly
About the Author: Chuck Braxton is a REALTOR® with the Meredith office of Roche Realty Group, Inc. He has applied his 25+ years of experience as a business executive to the challenges facing sellers and buyers of real estate in the Lakes & Mountains Region. His website is www.ChuckBraxton.com . Mr. Braxton may be reached at 603/677-2154 or toll-free at 800/926-5253 ext. 342 any time of day or evening, or by email at firstname.lastname@example.org.