How to Deal with Multiple Home Offers Situation

Table of content

• How to Deal with Multiple Home Offers Situation
• When will a home have multiple offers?
• Can you put offers on multiple houses as a buyer?
• What about multiple counter offers?
• Obligations of sellers when receiving multiple offers
• Multiple offer disclosure
• Fake multiple offers
• Agent dishonesty
• Can seller accept multiple offers?
• How to handle multiple offers on a house as a buyer?
• Let the offers sit for a spell
• Call for highest and best offers
• Screen for offer capacity
• Use counter offers strategically
• Be careful of home buyer love letters
• Don’t take too long to make a decision
• How to beat other offers on a house as a seller
• Secure pre-approval
• Offer a substantial cash payment
• Signal your intent with a large deposit

How to Deal with Multiple Home Offers Situation. A multiple offer situation is a seller’s dream but it can also be a buyer’s nightmare. While a single property can receive multiple offers in any market, this situation is more apt to occur in a sellers’ market – when buyers are numerous and inventory is low.

Receiving multiple offers on a home gives a seller their pick of several promising offers. They’re also in a better position to find that one offer that ticks all the boxes. But this situation can also be tricky for sellers, especially when they are unsure of how to proceed or allow their drive for the perfect deal rule them.

Whether you are a seller or a buyer, it’s critical to know what to do when there are multiple bids on a house and how to navigate this complex situation. We’re pulling out all the tricks and tips we know in this article that explains how to deal with a multiple offer situation.

When will a home have multiple offers?

There are many situations when a listing may be inundated in home buying offers. The most obvious of these is where the market leans towards sellers, particularly when the volume of home transactions exceeds the homes listed on the market. With 89% of homes selling in just under a month and 55% of home bids making offers above the listing price, we’re in such a market currently.

Other instances when a home may receive multiple offers include:

• Low interest rates, thereby encouraging home financing
• Listing a coveted property at a slightly undervalued price
• High home buyer demand without a similar increase in supply

How many offers will homes usually receive during such a period? That depends. According to recent data, the average number of offers on a house in June 2021 was four offers. But it’s not unusual for homes in a sellers’ market to receive up to or even more than 20 offers.

When the offers stack up in this manner, the sale process can quickly lead to a bidding war. While this sounds like a great situation for a seller, it doesn’t really do the buyer or seller any favors. In a bidding war, buyers are pressured to make offers they might not be able to honor, and this in turn may lead to a high fallout rate (the rate at which buyers fail to close a home deal).

Reports suggest the fallout rate is pretty low when there are few bids. But on a house with multiple offers, the fallout can rise to as much as 50%, which is a risky position for sellers, to say the least. If a buyer fails to close on a home after submitting a winning bid, the only recourse for the seller might be to file for damages. And that’s a situation you want to avoid as a seller.

Can you put offers on multiple houses as a buyer?

Submitting bids on multiple houses forms a part of house buying strategies for certain individuals. But is this allowed? The short answer is there’s no law that specifically makes this illegal. Buyers can submit bids for as many homes as they want.

However, you should know that this can be a risky approach. If more than one of your bids is successful, you might find yourself legally bound to purchase both properties. Besides, a seller who finds out that you’re actively bidding for other homes might be reluctant to seriously consider your bid for their property.

So, perhaps the more important question is: should buyers make offers on multiple homes at once? We don’t recommend doing this unless you’re satisfied that the other bids have little to no chance of being accepted.

What about multiple counter offers?

When dealing with a multiple home offer situation you may receive multiple counter offers where the seller has decided to engage with one or more bids. Usually, a seller may take any one or more of various actions after their home is subject to multiple bids. The seller can:

• Accept one offer and reject the rest;
• Submit a counter offer to one or more offers and reject the rest;
• Submit a counter offer to one or more offers and wait for a response;
• Reject all offers;
• Invite a few or all of the buyers to submit their best offer

When the seller decides to counter a few or all of the submitted bids, a multiple offer situation may be the likely result as several buyers will change their bids on the purchase price.

Obligations of sellers when receiving multiple offers

Although it can sometimes feel like the Wild Wild West, the real estate market is highly regulated. Realtors are bound by a code of ethics that dictates how they should act in relation to their client and the other party. Home sellers and buyers may also be subject to legal rules and regulations that may affect their real estate sale and house buying strategies.

Some of these rules and ethics apply to multiple offer circumstances. For instance, legal rules in some states regulate multiple offer disclosure, how sellers should approach and consider multiple offers, and how an estate agent should act.

Multiple offer disclosure

You’ll often hear about the unspoken rule that sellers should not inform all buyers about multiple bids on a home. However, this is more of a loose convention than a rule. The National Association of Realtors (NAR) advises that purchase offers are not necessarily confidential. Sellers are not obligated to keep the fact of multiple offers to themselves, neither are they always required to disclose this information to buyers. But there might be local laws that limit how sellers and their brokers may disclose the existence or terms of other offers to buyers.

Fake multiple offers

Can home sellers lie about multiple offers? To be clear, it is wrong and illegal for sellers to falsely claim that their listing received multiple offers. Such action will be a direct breach of the realtor code of ethics, as well as a breach of local housing laws. In addition, a dishonest seller may be liable in court for misrepresentation if one or more buyers suffer a disadvantage as a result.

Agent dishonesty with mutiple offers

Can an estate agent lie about other offers? Not any more than sellers can prop up their listing with fake multiple offer claims. Realtors are not allowed to lie about showings, the terms of other offers, or their existence. Any estate agent who is dishonest about their client’s listing may be expelled from the profession. They may also face civil or criminal liability for their actions.

Can seller accept multiple offers?

That depends on the specific circumstances. A seller may expect a specific bid on their home to win but they might still have reservations about that bid. In such an instance, the seller can include a clause that allows them to accept other favorable offers subject to a contingency in favor of the initial winning bid.

However, apart from this, a seller cannot simply accept several offers from multiple buyers without more. Such an action exposes them to the threat of legal action from the aggrieved buyers.

Of course, all of this means that, practically, a seller can only ever completely accept one offer. As a result, when faced with real estate multiple offers, there’s more pressure on the seller to make the best possible decision. Next up, we’re explaining how to deal with the several bids you receive and ensure that you make the right decision.

How to handle multiple offers on a house as a buyer?

Let the mutiple offers sit for a spell

We get it. It’s just hours into your listing and the offers are pouring in faster than you can count. Maybe you’re even seeing figures you could only hope for prior to the listing and now, your hands are itching to accept that big, beautiful deal. However, it is critical to resist that urge for now.

If you rush into a decision, you might be leaving money on the table. Even when they put their best foot forward, buyers typically hold something back when making an offer. Instead, allow some time for buyers to reevaluate their initial bid and for other buyers to submit fresh bids (48-72 hours is a good start). But no matter what you do, never accept the first offer right off the bat.

Call for highest and best offers

Every buyer can find something to improve in their offer, especially when they know that other parties are interested. A good practice is to inform all buyers that you’re giving them time to go away and come back with their best offer. Buyers will appreciate the heads up as it gives them an opportunity to beat off the competition.

Sometimes when dealing with multiple home offer situations, the highest and best that you receive, it’s easier to make a concrete decision knowing you’re seeing the best you can expect.

Screen for mutiple offer capacity

In theory, buyers can offer any terms they want to. While most aren’t this reckless, the pressure of competing against multiple offers might impair good judgment. It falls to you to ensure the offers you’re seeing are genuine and the terms have a realistic chance of closing.

A good way to determine capacity is to watch out for those buyers that are pre-approved. When a buyer has a pre-approval from a lender, it’s more than likely that they will get the loan, barring any surprises.

Use counter offers strategically

When dealing with a multiple home offer situation you also need to consider that counteroffers are not just for reproducing the terms you think most favorable to your sale. Instead, you should employ them when you receive an offer that ticks many boxes but doesn’t quite get there for you.

Carefully consider those offers you wish to counter and dispute only those terms you believe might become more favorable with a nudge from you. Also, be certain to suggest counters that the buyer might consider accepting. If you simply beat them about the head with absolutes on your end, there’s a greater risk that they’ll withdraw their offer.

Be careful of home buyer love letters

Some buyers send a letter along with their offer. The letter will often add a personal touch to the offer, describing the goals of the buyer and why the seller should consider their offer. Some even go so far as to include pictures of their family and pets.

While there’s no law against sending or reading such letters, they might put you in trouble if you make a decision based on a love letter. Housing laws disallow sellers from accepting offers based on reasons that might be discriminatory. So, you should be wary of such letters.

Don’t take too long to make a decision with mutiple offers

If you take too long, some buyers may simply withdraw their offer leaving you with even fewer options to consider. You’re likely dealing with multiple real estate agents, and many of these will advise their clients to look elsewhere. As you make a decision, carefully compare each offer with your specific goals for the sale. Would you like more time to move out of the house after closing the deal? Look for bids that offer an easy transition. Is money more important to you? Then filter the bids from highest to lowest.

However, keep in mind that when you’re in a situation dealing with the highest home offer, the highest is not automatically the best. For instance, some offers might promise a high number, but require you to accept a longer closing period. Besides, you shouldn’t get carried away with the numbers alone, your home may not be worth that much. Accepting such an offer will likely produce problems later on at the appraisal stage.

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How to beat other offers on a house as a seller

Secure pre-approval

Pre-approval gives you a stronger bargaining hand since it means the lender will likely finance your purchase in principle. With a pre-approval, the lender will have confirmed your employment status, pulled your credit report, evaluated your bank statements, and carried out a host of other due diligence actions. Sellers know to look out for pre-approved buyers and being able to include this in your offer can be the difference in a multiple offer real estate situation.

Offer a substantial cash payment

Sellers love cash payments since it means they don’t have to worry about bank appraisals, lengthy closing periods, or stringent lender requirements. While making a cash offer is not one of the more creative ways to win multiple offers situations, it is tried and true.

Don’t be too hasty to promise cash though. Buyers prefer financing for obvious reasons – being able to spread out your home payments over several years is an advantage. Only put up as much cash as you can realistically afford.

Signal your intent with a large deposit

A large deposit can turn the seller’s head in your favor since it signals your intentions over the property. While some buyers may be reluctant to fork out such a substantial sum as earnest money, there’s no reason why you should be. Your deposit goes into your down payment for the house. So, paying a large deposit is simply giving the seller that money now instead of later.