In today’s real estate market receiving multiple offers on a property is not uncommon. In fact we recently offered several properties for sale that had seven offers on each the first weekend. When this happens it is critical that the agent or Broker have a strategy to properly evaluate all offers in order to advise their Seller clients how best to respond.
Providing “Offer Instructions” is an effective way to guide and direct agents on what the Seller would want in the offer. Drafting “Offer Instructions” which can be loaded on to our forms platform provides agents an opportunity to review the “Offer Instructions” prior to submitting an offer. This helps to influence the transaction from a very early stage, and also serves to remind agents of what is needed for an offer to be considered. Additionally, this will assist in providing a level playing field for those making offers and will help in reducing hostility and disappointment for those whose offers were rejected.
This is increasingly important due to so many new and experienced agents that do not pay attention to details. I cannot tell you how often agents submit offers without lender approval letters, copies of earnest money, offers that are unsigned by the buyer, offers prior to actually showing the property and cash offers without providing verification of funds to close. Providing “Offer Instructions” for agents to review also serves to reduce potential mistakes and oversights in offers; thus insuring that offers that are received can be considered by the Seller client.
When Multiple Offers Are Received
When multiple offers are received, the Broker or agent must have a strategy to handle them, and an effective way to assist their clients to evaluate them. Provided agents have followed the “Offer Instructions” everything that is needed to evaluate each offer should be included. This should include lender approval letters, copies of earnest money, offers and exhibits that are signed by the buyers, notification that the agent has actually shown the property, and verification of funds to close if paying cash.
Options for Handling Multiple Offers
When Multiple Offers are received the Seller Client has five options when responding to the offers. It is essential that the Listing Broker or agent explain these options to the Seller Client as early in the listing process as possible. The options are as follows.
The Seller Client can provide a designated period of time for offers to be received and then:
- Accept the best offer.
- Provide all offerors the ability to submit their highest and best offer.
- Counter one offer while putting the others on hold.
- Counter one offer and reject all others.
- And of course all offers can be rejected, but this is not usually the case with multiple offers.
Presenting Multiple Offers To the Seller
As Listing Brokers or agents, we are required to present all offers. This should include not only the offers but also an analysis of each offer in a way that shows all of the financial implications associated with the offer. Presenting multiple offers is critical, since each offer may have as many as 22 pages. With this in mind it is essential that the Broker or agent extract all of the information contained in the offer in a way that will show the financial implications of each offer and the bottom line proceeds for the Seller Client. This can only be accomplished by being able to quickly prorate taxes, calculate future balances of the Sellers mortgage debt and prorated interest, HOA prorations, escrow refunds, insurance refunds, closing cost contributions and other cost or concessions called for in the offer. The best way I have found to do this is with an “Offer Analysis Template” spreadsheet. In the absence of an “Offer Analysis Template” spreadsheet it becomes overwhelming for most Seller Clients to evaluate each offer. Unfortunately an “Offer Analysis Template” spreadsheet is something that is not readily available to most agents; thus it has to be created by a knowledgeable and experienced Broker or agent. Once incorporated into to the process of presenting Multiple Offers it will reduce the tension Seller Clients have as they evaluate offers, and will simplify the offer comparison process by having the financial implication of each offer placed side by side in a spreadsheet.
Additional Benefits of an Offer Analysis Template
Regardless of whether one offer or multiple offers are being evaluated an “Offer Analysis Template” spreadsheet is also helpful in tracking the negotiations associated with each counter offer. It will quickly reveal the movement of the other party in the transaction and will provide insight into how to negotiate more effectively.