The Art of Handling Multiple Offers: Choosing the buyer who will perform
How does a smart seller handle multiple offers on their property? How do you deal with them and how do you secure the best possible price while not scaring away your best buyers? There's a lot that goes into it. I think most people just focus their energy on “how do I get the number to the highest number I can possibly get?” Forgetting that it has to be “how do I get the number to the highest it can go with the buyer who will actually close and perform?”
There's a lot that goes into it, but here's step number one. Recently we've had a number of homes where we have upwards of 8 to 15 offers on multiple different properties. The way you handle it at first is going to determine the success. Most people's instinct is to just start shooting off big numbers and rejecting the smaller ones. That is not the right strategy. That first step, strategically thinking isn't that you're going to figure out the sales price. The first step in responding to the offers is simply to keep everybody engaged and to allow that floor to float up because what you want to know is what is your downside.
If you lose this offer, what's the offer then going to be? You want to understand what cards you're playing with so that you also understand what kind of aggressiveness you have in your control. So the first step is really just to encourage all offers and when someone calls and they say, "Hey, here's where my buyer's going to come in” and it's not quite the asking price, some people will say to them, "Oh no. If you don't come in at that price, forget it. We're not selling to you." Our response is different. It's just, hey, write the best you can, send it over, and let us do our work. Let's see what we can do.
The reason why, let's just imagine an $800,000 home. You get a bogus offer of $700,000 something ridiculously low on your $800,000 property. So you have that offer now. That offer, what most other people see as trash, we see as a treasure because now we have the next person that's saying, "Hey, we're going to write an offer. Where are you at? What will the seller do?" And they ask the question, “do you already have offers?” Now, because we have this ridiculous $700,000 offer, we are able to ethically say yes in fact, we do have offers. Now don't worry. We still haven't responded and you're in perfect timing. Just make sure you get the best in you can because we have so much activity and there's a lot of interest on the home. Just go ahead and submit your offer. We'll get in front of the seller. We'll get you a response.
Now, this buyer, buyer B who's the serious buyer, they are not envisioning that other offer is $700,000 and of course, we would never tell them that was the case. They're envisioning that it's probably somebody that loves the home just as much as they do so they think that offer is maybe already at $800,000 full price. That's how you start getting offers that start floating above. So really the first step is, let's get all the offers and then comes the first counter offer round (called a multiple counter offer). Here is where you just counter offer everybody and encourage their highest and best and clean up the terms.
Now, when those highest and best come in, which is essentially the buyer's counter offering themselves, now we see who we're working with. Now we see who the strongest are. And if we have something we really like, of course, we can move forward, or we can just come back to them and say, "Gosh! I know we asked you for your highest and best. Boy, it's been really difficult to decide. There's just so many qualified people. Now, Mr. Agent or Miss agent, we really like you. We think you're professional. We like the way you work. We like how responsive you've been." You play to their ego a little bit. "We like how responsive you've been and it's just a tough thing. Can you help us try to make this decision? Did your buyer really provide their highest and best, or would you like another chance?"
It's amazing how all of a sudden that highest and best they gave us a day ago is starting to float and go and go. And if you're really playing it right, you can start having contingencies come off early, due diligence periods end faster, appraisals waived, there's all kinds of things that come into play. But they only come into play if you have the leverage and the power of having a substantial buyer pool that's interested and that you haven't prematurely scared away.