In a "hot" real estate market, the buzz-phrase is "BIDDING WAR."
It's what every buyer fears. (Buyers, click here for some thoughts you should not be scared, if you have the right REALTOR®.)
It's what every seller wants...or do they?
Sure, it sounds great when you're chatting over the water cooler with your colleague: "Our house had multiple offers! The buyers were in a BIDDING WAR just to buy it!"
A bidding war (sensationalized by the not-so-real "reality" shows on HGTV), which may also be referred to as a "multiple offer situation," essentially refers to a real estate listing that receives more than one offer at the same time, from more than one buyer who is interested in purchasing it.
A bidding war is a fun thing to brag about to your neighbors, but they can also be stressful if you and your REALTOR® don't have a strategy in place before the offers start coming in. Otherwise, you may be in danger of making a hasty decision, choosing the wrong offer, and ending up back on the market if that transaction doesn't work out.
What does it take to successfully navigate a bidding war, as a seller?
First, it takes a savvy and experienced agent, who knows the real estate contracts inside and out and has a strategy for dealing with multiple offers. "Isn't this all real estate agents?" you might be thinking?
In a word: No.
Before you hire your REALTOR® ask him or her to tell you about their strategy for dealing with multiple offers and what experience he or she has in representing the seller when there is more than one offer on the table. Any REALTOR® you're interviewing should be able to articulate a variety of strategies and scenarios for making sure the seller is protected and well-represented when there are multiple offers. In addition, the REALTORS® you're considering should be able to tell you specific instances where they put those strategies into play for a client. Most importantly, no REALTOR® should ever guarantee you multiple offers, no matter how hot the market is.
How does a seller choose the best offer, when there are multiple offers on their home?
Every seller is going to define "the best offer" differently, and it may not always be the bottom line net proceeds/dollars they will receive at closing. Of course, money is important, but for example, some sellers may need a little bit of a longer closing (closing 60 days from now, rather than 30) in order to find their next home, and some sellers may prefer an as-is sale (the opportunity to negotiate compensation instead of physical repairs to the property) rather than a buyer who insists on the seller making repairs prior to closing.
Your REALTOR® should discuss with you, prior to listing, what is most important to you in the sale of your home. And remember to be honest and really think about your answers -- your REALTOR® can only represent you to their best ability if they have a good idea of your circumstances and what is truly important to you.
Your REALTOR® should also discuss with you, up front, what information they have your permission to share with other agents who have a potential buyer for your home, for example, if there is a specific closing date that is ideal for you or if there are other terms that would make that buyer's offer more attractive to you. (A truly savvy buyer's REALTOR® will be asking your agent these types of questions, so your REALTOR® should have those answers ready to go!)
What could go wrong?
In short: a lot. Comparing the offers carefully and making a good decision could be a stressful situation with the wrong REALTOR® or a REALTOR® with little experience. In a seller's market where there is very little housing inventory, buyers feel desperate and may make offers just to "reserve" a property for themselves while they decide if they really want it
Here are a few examples of what could go wrong:
- You may choose a buyer who offers a high price but isn't well-qualified with a reputable lender
- You may choose a buyer who offers a high price, but when the property doesn't appraise, they simply walk away
- You may choose a buyer who submits a strong offer but then expects a huge price reduction or other concessions during the due diligence/inspection period, which makes their offer not so strong anymore
- You may choose a buyer who is not serious and continues to keep looking for a better home and ultimately walks away during the due diligence period and leaves you high and dry
Any one of those scenarios could happen to any seller, but in multiple offers, when buyers feel desperate or are eager to "win" the home, a great REALTOR® will have some extra strategy up his or her sleeve to give you a bit more protection. The aim, of course, is to choose the best, most-qualified buyer who is going to stick with the contract and get to the closing table...and perhaps a back-up buyer or two along the way for added insurance.
Ultimately, the most important thing to remember is this: it only takes ONE qualified, interested, ready-willing-and-able buyer who wants to purchase your home for you to get to the closing table.
We are extremely proud of our success rate when we have multiple offers on our listings. If you have questions or would like to talk further about selling your home, please reach out to us at 404-994-2181 or email Maura(at)BuySellLiveAtlanta.com
