Terms (Other Than Price) Sellers Should Negotiate in a Multi-Offer Situation
The real estate market can change things around when you least expect it. Sometimes, it’s an ideal playing ground for buyers, and other times it’s better suited for sellers. Either way, the most important consideration as a real estate listing agent is to evaluate various factors to ensure you represent what your seller needs the most.
But, what happens when the market favors the seller in such a way that they end up with multiple offers on their property? Then, there is room for negotiating not only the purchase price but all the other terms in the contract. Let’s read on to find out more about negotiating a multi-offer situation for your seller.
What Is a Multi-Offer Situation?
As a real estate agent, there’s a chance that you’ve had to deal with a property that is in high demand. If you haven’t, then it’s best for you to understand the process in case you come across it in the future. In simple terms, this is a situation where you find yourself with more buyers wanting to purchase the property that you have on the market.
This is an ideal situation for the sellers. It gives them leverage to choose the buyer who can offer the most desirable terms in addition to the highest price. While this may sound like an easy sale from your end, there are still some factors that you should consider to ensure your process is fair. Moreover, you want to treat each willing buyer according to the Code of Ethics set out by the National Association of Realtors. Additionally, this is the one way that real estate agents avoid any unnecessary communication, or misunderstandings while processing a sale.
What You Need to Know As a Listing Agent
If you’re the real estate agent who’s fortunate enough to list a house that’s selling like hotcakes, there are a few terms that you should consider knowing. The great news is that your seller is in the best position. Yet, having to go through multiple offers and figuring out which is the most suitable candidate can be a very stressful situation. There are other factors besides the price that you should consider when you’re going through the process. Here are some steps to consider as you advise your seller in a multiple offer situation.
- Compare the offers
It’s always important for you to organize the offers that your seller has in a way that simplifies things for them. This should make it easy to weigh in on the pros and cons of each offer. The best way to do so is by drawing up a spreadsheet or a comparison chart. This is when key points such as pre-approval and financing are priorities to ensure that the deal with the most ideal components is accepted.
- Think about your seller’s needs
The thing about making a good offer is that it’s highly dependent on what your seller’s needs are. What they need from their home sale should impact other fundamental aspects of closing the sale. Let’s say that your seller wants to sell as quickly as possible. It’s essential for you to be realistic with potential buyers about the timelines that your seller prefers to have concluded their sale. Additionally, it means that the two most important dates, the closing and occupancy dates, may be especially important.
- The best offer isn’t the highest one
It’s easy to think that the main point of selling a home is to make as much money as possible. Yet, this isn’t the case for every seller. This is why you should always find out more about what your seller wants before you negotiate with prospective buyers. However, this doesn’t mean that you shouldn’t use your expertise to help guide your seller towards making a better decision. Here are some things to consider when discussing an offer with your seller clients:
- Terms of the contract
- The buyer’s motivation
- The buyer’s qualifications
- Don’t be swayed by promises
It’s not unusual for buyers, when they are competing, to make promises to your seller that are not part of the contract. These may include verbal statements like “we won’t beat your sellers up on inspections,” or “we’re ok if the appraisal comes in low.” Your job as a real estate agent is to use your expertise to ensure that your seller doesn’t rely on these terms unless they are in writing as part of the contract. Also, be wary of buyer “love letters.” Even though certain gestures such as sending letters to your seller may be welcomed, they can still be illegal in certain parts of the country as they may be violations of fair housing laws.
Non-Price Terms That Sellers May Want to Negotiate
Here are a few terms other than the price of the piece of real estate that sellers should negotiate in a multi-offer situation.
- High due diligence fee
The due diligence fee is typically a negotiable, non-refundable fee. This fee is paid directly from the buyer to the seller. Not only does this fee give the buyer some skin in the game, but sellers may also want to negotiate this fee in a multi-buyer situation so they can see which buyers are legitimately interested in purchasing the property and which ones are just kicking tires.
- High earnest money deposit
Earnest money is typically delivered when the sales contract or purchase agreement is signed. Once this set amount of money is deposited, it will likely be held in an escrow account until closing. After this time period, the deposit is applied to the buyer’s closing costs as well as their down payment. A higher earnest money amount may be a reflection of the buyer’s intent to close on the sale, but keep in mind that this money is refundable during the examination period (or the due diligence period).
- Seller leaseback period
In this seller’s market, one of the most attractive terms for a seller is the option to stay in the property after closing. Our firm has been negotiating this term frequently over the last year. . In this situation, the seller will then lease the sold property from the buyer. During this period, the seller no longer owns the property. Instead, they live in the property for the agreed-upon time period written in a rental agreement or a “Seller Possession After Closing” agreement. The seller already has the proceeds from the sale of the property. The seller leaseback period is another term a seller may want to negotiate in a multi-offer situation. As a seller, you can benefit from a seller leaseback because it gives wiggle room in terms of preparing a new home and moving. Depending on the seller’s situation, they may want to negotiate a longer seller leaseback period or a shorter one.
- Appraisal waiver
If you’re helping to sell a home in a multi-offer situation, you also want to negotiate an appraisal waiver. Sellers benefit because buyers can pay more for a piece of property than what it might appraise for based on past comps. And buyers may also benefit because they still take advantage of attractive interest rates without losing out to a cash buyer.
- As is (no repairs)
In a multi-offer situation, selling a home “as is” is a good way to speed up the buying process. It will save the seller both time and money.
When you’re in a multi-offer situation as a real estate agent, your main priority is to use your expertise to better the sales process. At the end of the day, when you’re helping someone sell their home, it’s important to know what terms are important to your seller clients.
About the Author
Scott Russell is the owner and broker-in-charge of Freestone Properties, an Asheville real estate company.
Additional Reading:
If you are selling your house for the first time, you may have no idea what the seller’s closing costs will be. As a home seller, you will have to pay a variety of closing costs when you finalize the sale of your home. You’ll want to have a rough idea of the closing costs and associated expenses when selling your property. Bill Gassett, Metrowest, MA real estate agent, has written an excellent article explaining the various closing costs sellers can expect.
Here is a question we’re hearing lately: Should I even bother fixing my house before selling it in a hot market? Most often, a home that is in need of repairs will sell for a lower price than if it were in top shape, even in a hot market. This article by Vickie Davies, of the Knieper Real Estate Team in Granbury TX, has some great tips to help a seller wade through that decision.
Even in a hot sellers market, an expert real estate agent will do all they can to market a home. Good marketing will always benefit a home seller, no matter how quickly the market is moving. Here is a great list of marketing strategies that every seller should expect from their Realtor, written by Cincinnati real estate pro Paul Sian.
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