Multiple Offers – What happens behind the scenes?
By Kathy Schmidt, Broker/Owner, Schmidt Realty Group Inc.
Multiple offers are common in 2022. What happens behind the scenes?
“Good news! You’ve got multiple offers on your house!” This is what every seller hopes to hear! It’s always nice to know that more than one buyer wants to move in. The truth is this means you should get the highest price possible with the terms and dates closest to what you were hoping for!
Right now, multiple offers are almost the norm in some price ranges in the Edmonton area. You might wonder what the process is for handling these. If you’re curious, read on!
As a busy listing agent, I prep my clients for the possibility of a bidding war when we first meet to discuss their sale. It’s important to understand ahead of time what to expect. Here’s a typical scenario for dealing with a bidding war from the listing agent’s perspective:
- Initially there may be just one offer that comes in. One offer is good, but creating competition is the best way for the listing agent to get the best price and terms for their seller.
- Once the first offer is received, the listing agent will inform their seller. They’ll then have a discussion about next steps. Would the seller like their agent to contact the other showing agents for other buyers to attempt to get more offers? Or would the seller prefer just to deal with the one offer? There may be reasons why the seller would like to work with the offer in hand. Not every buyer is willing to compete, and if the initial offer is very good the seller may not want to risk scaring off this first buyer. If that’s the case, then the seller’s agent will negotiate the offer with the buyer’s agent as usual.
- If the seller instructs their agent to do so, the listing agent will contact other agents who have shown the property to see if their buying client would like to write an offer. In a busy market like this, it’s not unusual for there to be 10-20 other agents who have shown the property the first day it’s on the market, so the listing agent will be busy communicating with all of those other agents, making note of their buyers’ interest in the property and encouraging them to also write an offer.
- As other offers are received, unless otherwise instructed by the seller, the listing agent will inform each of the agents representing the buyers specifically who the other agents are who have written an offer. This lets the buyer’s agent know who they are competing with. Specifically, it lets them know if there is an offer being written by an agent at the listing firm, or if perhaps the listing agent themselves are writing an offer.
- This whole process happens very quickly, usually in a matter of a few hours. If any of the buyers drop out of the multiple offer process, all agents with offers will be advised of this as well. As you can see, there’s a lot of work involved in managing the multiple offer process to ensure it is fair to all parties and that the seller is well informed and enjoys the best possible opportunity to secure the highest price and best terms.
- If an offer has also been written by the seller’s agent, other agents can request to have the seller’s agent’s broker involved in the offer presentation to ensure that the process is impartial.
- Once all the offers have been received, the listing agent (or their broker, if the listing agent has an offer as well) will present the offers to the seller. Ideally this is done in person, but often Zoom is used or the offers can also be presented by phone.
- When reviewing the offers, the seller will consider price (of course!), terms (is the offer subject to an inspection or subject to financing?), possession date, and any other terms that the buyer may have included in their offer. An unconditional offer (ie. if the seller signs it, there’s a firm deal, no inspections, no financing condition etc.) is always tempting to a seller. After all, who wouldn’t want to know that the sale was as good as done! However, sometimes a seller will choose an offer with conditions over an unconditional offer. Why? Perhaps the possession date lines up better with their moving plans. Perhaps the price is higher, and they’d rather give this offer a chance rather than take less in an unconditional offer. And sometimes it’s for very personal reasons. An unconditional offer from a developer might not be received as favorably by a seller as a conditional offer written by a young family who wants to move in and raise their family there. In the end, it’s the seller’s choice.
- During this process, the seller can instruct their agent to counter an offer. For instance, if a seller received a conditional offer for $465,000 and an unconditional offer for $460,000 the agent might contact the buyer’s agent with the unconditional offer and counter their proposal of $460,000 with a price of $465,000. In that case, the seller gets the price they want AND an offer without any conditions.
- When the process is complete, of course there is only one “winner”. The listing agent must then contact all the other agents to let them know that their offer wasn’t accepted. It’s not the most fun task for an agent to do as we know how disappointed the other agents and their buyers will be, but it’s all part of the job.
- It’s important to note that even if an offer is unconditional, the selling price isn’t normally announced until the seller’s agent receives the deposit from the buyer as per the offer to purchase. Once that’s been received and deposited into the listing firm’s trust account, then the sale is announced. The unsuccessful buyers can then learn the selling price and gain valuable market knowledge that might help them write a winning offer next time.
In the end, it’s important to remember that the buyer’s agents are all working to protect and advance the interests of their buying clients. And the seller’s agent is advising and advocating for the interests of their seller. As REALTORS® we understand it’s not personal when an offer is declined by a seller. Our job is to follow our client’s lawful instructions and to ensure that the process is handled properly. A good listing agent will document every step of a multiple offer so they can refer to their notes in case anyone asks about the process.
Learning to handle the intricate, detailed, and fast paced process of a multiple offer is vital in order for an agent to represent their clients’ interests well, whether those clients are buying or selling. My goal is to ensure that my clients feel well informed, well represented and fairly treated, whatever the outcome.