Ask Phyllis: How to handle multiple offers

 

Ask Phyllis is a blog series of frequently asked real estate questions.  Have a question about real estate?  Email us here

Dear Phyllis,

We received four offers on our home, two of which were at the same price. My agent pushed one over the others which we accepted. Now that we are in escrow this buyer is making demands for repairs and credits.  In hindsight I think perhaps our agent pushed this offer because the buyer’s agent works in the same brokerage.  What’s the best way to handle multiple offers?

Gail

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Dear Gail,

Each offer should contain:

• Preapproval letter. Firstly, I contact the lender and ask questions. In addition to questioning the lender on the buyer’s ability to obtain financing, I ask probing questions, such as has this buyer been in escrow before? I want to learn as much as I can about the buyer and their agent may be reluctant to tell me if their buyer has previously been in escrow and cancelled for some reason.
• Evidence of down payment. The buyer’s lender will also be checking the buyer’s average balance to ensure that the down payment is not borrowed.
• A letter from the buyer’s agent. A good buyer’s agent will include a cover letter about their buyer.  This should include how long they have been working together and in addition, how they know each other. I prefer to see a stronger relationship between agent and buyer – perhaps they are a past client or a referral from a co-worker for example.  A letter from the buyer is nice, but it’s often just fluff, the buyer certainly isn’t going to tell you anything negative.

The best way to handle multiple offers is to examine the details, look for:

• The number of “contingencies” The more contingencies, the more opportunities for the buyer to cancel and keep his initial earnest money deposit. However, an offer from a buyer which is contingent upon the sale of their home might indicate a very strong buyer. If the buyer has already removed their investigative (inspection) contingency, your buyer will be motivated and need a home to move into –it’s not as if they are renting and can simply wait a few more months for the perfect home.
• Down payment and cash reserves. Every home needs something after the buyer moves in. But, will they have the funds to make needed repairs or improvements? A buyer with cash reserves is an asset as they won’t be as frightened by the home inspector’s findings.
• What type of financing? Conventional loans have fewer appraisal issues than FHA loans.
• Who is the buyer’s agent? Are they a full time Realtor®? Have I had another escrow with them and if so, how smooth of a transaction was it? Being in escrow with a part time Realtor® is often a problem as they can be difficult to reach and consequently, simple negotiations take longer.

Terms are important. Perhaps one buyer has a larger down payment and they have waved their appraisal contingency. Or one of the buyers is offering you longer possession in the home after closing.

Each situation is different and I prefer to have a dialog with my home seller’s to explain what we are trying to accomplish. Sometimes the seller’s agent will incorporate the best terms and issue a counter offer asking each buyer to accept those terms and respond with their highest and best price.

Best of luck to you on your negotiations.

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