Avoiding problems

C - Multiple Purchase Offers: How to negotiate multiple contract offers?

If you receive multiple purchase offers:

You could inform both (or all) buyers that there is another contract offer and that they should make their best offer. Let them know that this will then help you to decide which party you’ll negotiate with for the sale. It tones down the “bidding war” fear that some buyers have. It also saves a lot of negotiating and quickly separates the serious from the hopefuls.

On the other hand, you don’t have to tell the other buyers that there are other offers, since it could scare off buyers who fear getting caught up in a bidding war. There is no rule that says you have to volunteer the fact that you currently have another offer.

In addition, you can always keep one party on the back burner through continued discussions and respond slowly to their offer overtures while working intently with the first buyers. 

We’ll both take it: 

Do not have more than one of your counter offers out at the same time. If you provide a signed counteroffer to more than one buyer, both could be accepted. You will have sold the house to two parties and be in a heap of trouble.

Make a counter to the number one buyers and stall on the second one. When number one comes back with their counter offer, then make your counter offer to buyer number two. This way you will only have one counteroffer outstanding at a time. Anytime a party comes back with their counter offer, it is, effectively, a rejection of your last offer to them.

One way around this restriction is the practice that’s employed in California. Their contract is structured such that the seller can have several counter offers out at a time. They can do this if the contract states that the contract is only valid when the buyers return it as an accepted offer and the sellers then sign off on it. Quite a bit of protection for the sellers.

Comparing offers:

Suppose you have two offers on your $279,000 home. Buyer One offers $277,000 and Buyer Two offers full price. Sounds like Buyer Two is the winner. But suppose Buyer One is putting up $10,000 in earnest money and Buyer Two only $2,000. Wow, it appears that Buyer One is a lot stronger. Let’s play it safe and go with Buyer One.

But now, as you review the offers, you realize that Buyer One wants closing and possession in three weeks while Buyer Two wants two months which may be helpful and necessary since you don’t have your next home selected. OK, so Buyer Two is not only paying full price, but is giving you a lot of flexibility for lining up your next home. Two thousand in earnest money isn’t great, but is acceptable, so Buyer Two gets your vote.

However, on further examination of the offers, you find that Buyer Two has a house to sell and Buyer One has nothing to sell. Well, that makes it a lot different. Surely you could move into something in 30 days and not have to worry about the buyers selling their home. Buyer One, you are our selection.

Oh, what's this? Buyer One hasn’t gotten pre-approved as yet, but Buyer Two has a preapproval letter that states that they also qualify for a bridge loan. Further discussions with Buyer Two reveals that they would be willing to drop their contingency on selling the house and use a bridge loan if necessary. So Buyer Two is the real winner.

When only one buying party is involved, the various issues and contingencies are easier to analyze. Dual or multiple offers provide more of a challenge, but force you to closely examine the situation in its entirety, which as can be seen, is a good thing.