With many homes in San Carlos going through multiple bids, I have had a few requests to fully explain the process from a listing agent’s perspective. If you have found yourself on the losing end of several multiple bid situations, the following may offer a few clues as to why your bids were not accepted.
From a listing agent’s perspective:
If I have a new listing on the market and almost immediately have agents asking if we would look at a pre-emptive offer……it is most likely time to consider planning for multiple bids. However, first, we need to look at the possibility of a pre-emptive offer. A pre-emptive offer is essentially an offer that is made prior to the property being put on the open market. Most valid pre-emptive offers are above the asking price, offer a very quick close of escrow and are mostly contingency-free. The advantages to taking a valid pre-emptive offer is that the sellers do not have to go through open houses, broker’s tour, showings, etc. They also have the security of knowing that the deal is locked up and they can plan for their next home. The disadvantage of taking a pre-emptive offer is that, while it may be a great price and great terms, the question of whether the property was undersold will remain unanswered.
MY ADVICE >>> The pre-emptive offer better be contingency-free, contain an ideal close of escrow and be extremely strong on the purchase price for it to be considered.
For the purposes of this post, let’s assume that the sellers turned down a pre-emptive offer and moved into the planning stages for accepting multiple bids.
The first item for consideration is selecting an offer date. Normally, a listing agent would want the property to go through one weekend’s worth of open houses and one broker’s tour. The only question becomes whether to put the home on the market for a second weekend prior to taking offers. The advantage to holding offers after only one weekend is that you are likely to keep all interested buyers without having them stray to another listing that may come on the market in between the first and second weekend open houses. The disadvantage to holding the offer date after the first weekend is that you may miss out on buyers that have missed it the first weekend.
MY ADVICE >>> If your agent believes that he or she will have at least three bids coming after the first weekend, set the offer date to follow the first open house. Anything less than three and you may want to consider a second weekend.
The second item up for consideration is whether to have the buyers’ agents make a presentation or have them drop off the offer in a sealed envelope.
MY ADVICE >>> I realize that it is slightly time consuming, but I prefer agents to make a presentation of the offer. It gives the listing agent an opportunity to directly ask questions about the offer, terms and the buyers themselves. Also, if it is an agent that I am unfamiliar with it gives myself and the sellers the ability to gauge the competency of the buyer’s agent. Keep in mind that once the offer is signed by the sellers, you are relying 100% that the buyers and the buyer’s agent will perform as indicated on their offer.
Third, the offer presentations. Typically, the listing agent will ask the buyers’ agents to step into a conference room and briefly present their offer to the listing agent and the sellers. The one item that still continues to amaze me is the number of buyers’ agents who step into the offer presentations completely unprepared…you would think that it is the first time they are viewing their own offer. Clerical mistakes, missing signatures, fumbling through the paperwork, disclosures not entirely signed off, forgetting their clients’ names….the list goes on and on. For every five offers, you can usually count on the following: one will be below the list price, one will be at the list price, one will be above the list price but have a strange term attached to it, and there will be two that shine above the others.
Fourth, what to do when you have two offers that a very similar. If the terms, price and close of escrow date are similar on both offers, you have a few choices. (1) look for minor terms, such as a slightly larger down payment, and go with that offer, (2) counter one of the offers, (3) use a multiple counter format and counter both offers.
MY ADVICE >>> Pick one offer and counter it. If the counter offer is not accepted, move to the second, similar, offer. Multiple counter offers involve a possible risk. If you counter one or more parties and all parties decline, you have really put yourself in a terrible negotiating position. Additionally, many buyers make the mistake of thinking once they sign the multiple counter, they have purchased the property. Incorrect. If all parties sign their respective multiple counters the seller still has an opportunity to select the offer they want to work with.