Negotiation Problems

C - Multiple Purchase Offers: Negotiating multiple contracts?

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, that this will help you to decide which party you’ll negotiate with. It tones down the “bidding war” fear for many buyers.

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

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. This can be done if the contract states that the contract is only valid when the buyers return it as an accepted offer and then the sellers sign off on it.

Comparing offers:

Say 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. You can also try to get the earnest money increased.

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. 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. 

Another buyer can unleash emotional responses:

When you tell good prospects that you are about to get another offer or that there is already another offer in the works, you run the risk of losing them. Many people in this situation are resigned to the fact that they're too late in the process or that they don't want to get into a bidding war. 

In a down market, it’s also possible that they won’t believe you. Therefore, in a slow market, handle multiple offers very carefully.

If the situation calls for it, consider revealing to your prospects that there is interest from another party, but that "they haven’t put anything in writing yet." Refer to these other buyers as a couple from_______, or the “retired” couple, or some descriptive phrase that humanizes them and strengthens their existence in the minds of your current prospects.

Or you could advise the second bidders that you've been moving ahead with an offer from a "couple from Missouri" but should anything happen, you'll contact them. Let them know that the other buyers saw it and quickly made an acceptable offer. This shows empathy, sincerity and could keep you in good stead with these potential buyers.

When buyers lose in a bidding war, they often rationalize why they'll be better off without the property. They often feel like they were treated unfairly and the seller or the Realtor become the easy target. If the buyers with the winning bid should fall through, the losing buyers have long since come to the conclusion that they are better off without your house.

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