You may have heard that the Charleston Real Estate Market has very low inventory and many sellers are receiving multiple offers. It’s true. I have ready and willing buyers and yet I have no homes to show them that meet their criteria. Homes that do come on the market are moving rapidly, many with multiple offers. One of my colleagues wrote nine different contracts for her buyers on various properties, all over asking price, and none were accepted. For my sellers, I am recommending that there are several ways to deal with multiple offers that have benefits beyond simply taking the highest monetary offer.
1.The most widely used method when a seller receives multiple offers is to ask for each buyer’s Highest and Best Offer. This allows buyers to reconsider their offer and increase if they are able and seriously interested. The risk a seller takes is that some buyers will not want to engage in a bidding “war” and high offers may be allowed to expire. I always remind my sellers that contracts are more than just the offered price. The other terms may not be as desirable such as closing date, required financing, and other contingencies.
2. The next likely choice is to pick the best offer, weighing all factors, and move forward. Sellers may not realize as much profit potential, but it is a simpler and quicker resolution. Buying and selling is inherently about risk tolerance and the risk/reward may not be worth the chance of losing an enthusiastic buyer.
3. Sellers also have the option of handling the offers in the order they are received making counter offers (or not) accordingly. In a low inventory market such as we are experiencing in 2021, this has considerably less risk that the buyers will find another property and walk away; however, an offer to purchase does come with a deadline for response, so timing can be an issue.
4. Another response sellers can employ is to create a universal counter offer and send it to all buyers. This can minimize the downside options throughout the contract for the seller. This method requires top notch communication on the part of the seller’s agent in order to insure a fair process for all. Deadlines, dates and times are extremely important to managing this process successfully.
On a side note, from a buyer’s perspective, escalation clauses have recently received a lot of notice with the current market conditions. This involves writing an offer with incremental dollar increases on a schedule to outbid other buyers without necessarily offering their highest and best offer. For example, a buyer might indicate that he/she will automatically pay $1000 over the next highest competitive offer without having to renegotiate. My advice to sellers and buyers is to avoid this option at this time. The difference for buyers over the life of the mortgage is minimal and for sellers, the chance of getting what the market may demand is diminished.
5. If you are a seller and find yourself in a multiple offer situation, you can also reject all offers and raise the price. The obvious risk of driving buyers away is high and greedy homeowners may cut off their noses to spite their faces in this scenario.
There may be other solutions to the enviable problem of multiple offers. If you have an idea, please share.