In this tight inventory market, multiple offers are the norm.
Having many offers to choose from is a good problem for a seller to have, but itâs not without its challenges. Some agents assert that the highest bidder (especially those with all-cash offers) will always be a sellerâs best bet, but itâs not always that simple.
To best protect your client and serve their interests, consider this your go-to guide to get the most out of those flurry of offers, and help your client choose the one that will leave them feeling the most satisfied.
Table of Contents
- How to weigh cash and financed offers
- Ask: How is the appraisal addressed?
- The good and bad of sight unseen offers
- Pay attention to closing timeline
- Presenting offers to clients
- Offer management and comparison tools
- Red flags to watch out for
- Keep consistent communication across all buyers
- Manage seller expectations
How to weigh cash and financed offers
Ensuring that your seller is protected by only considering offers with solid financials backing them is one of the most important things a listing agent can do for their client during this time.
Thatâs why agents agree that when it comes to fielding multiple offers, cash on hand and offer price are typically primary considerations.
Cash offers are simple and solid, Jason Collins, a Century 21 John T. Ferreira & Son, Inc. agent, told Inman. They eliminate the uncertainty financed buyers face of getting approval for a mortgage, and make very real a buyerâs ability to waive the appraisal. He said if thereâs a cash offer on the table for his seller at the right price, âWeâre always going cash.â
If cash offers arenât at play, agents should also be paying attention to loan type, since not all loans are created equal.
Dana Benjamin, an agent with ReeceNichols â College Boulevard in Kansas City, Missouri, told Inman that loan type is one of the first things she analyzes when her sellers get upwards of 10 offers.
Federal Housing Administration (FHA) loans should always cause an agent to take pause since they include a little more red tape. If an FHA-backed offer goes above the homeâs appraised value, the seller will be required to reduce the selling price to meet the appraisal, and any defects in a home as stipulated by the FHA will also need to be taken care of by the seller before the deal can be closed.
Likewise, U.S. Department of Agriculture (USDA) and U.S. Department of Veterans Affairs (VA) loans, which do not require a down payment, can feel more risky to a seller. If a buyer is putting little to no money down, it could be a foreboding of things falling apart later on, particularly if repairs show up in an inspection and the buyer is too cash-poor to cover them.
âWe donât necessarily look at just the highest offer â itâs important to sit down, and look at the buyerâs finances and go a step further, like getting on the phone and interviewing the buyerâs lender to see if the buyer has been vetted and how soon can the lender close,â Jay Thomas, an agent at eXp in Houston, told Inman. âJust making sure this buyer is ready and good for it, and they have had their credit and assets all verified.â
Additional resources:
- Which home loans are best for new buyers?
- 8 things mortgage lenders do that frustrate agents
- Evaluating multiple offers? 15 questions sellers should ask
- How to navigate multiple offers: It comes down to money
Ask: How is the appraisal addressed?
After reviewing price and financing, one of the next most important considerations in a hot sellerâs market is how the appraisal is addressed in the contract.
With bids ratcheting home prices up and up, dealing with offers that go above and beyond the homeâs appraised value is an increasingly pertinent consideration. High offers look great to a seller â but theyâre pretty meaningless if they donât address what happens in the event that the appraisal doesnât meet the offer price.
âProbably the biggest thing weâre looking at [is] how theyâre addressing the appraisal and the contract in the event of an appraisal shortage,â Benjamin said. âIf they address appraisal issues in the contract under âadditional terms,â that theyâre willing to bring X number of dollars, in the event of a shortage ⌠those are the offers that are getting accepted.â
Seeing that buyer proof of cash that can handle appraisal issues is also key, Collins said.
âPeople [are] coming in $25,000 over [asking], but then saying theyâll waive the appraisal contingency,â Collins said. âIf they have the opportunity to do that, it means they better have some cash on hand.â
Additional resources:
- How to protect your buyers from appraisal catastrophes
- How to answer 10 common seller appraisal questions
- A neighborhoodâs racial makeup impacts home values more now than it did in 1980
- Should listing agents be present at the appraisal?
The good and bad of sight unseen offers
Sellers will no doubt be excited if they receive offers prior to even showing their home. In some states, such occurrences are even more likely if âcoming soonâ status properties are allowed to be marketed in advance and the market is moving at a fast clip.
But, some agents say you should be wary of any offer made before the potential buyer has set their foot through the door. The practice, while enticing, can just end up opening a can of worms that the seller may need to deal with later.
In Kansas City, Missouri, Benjamin said that having the option of marketing homes on Facebook, Instagram, and just through sending the listings to other Realtors a few weeks in advance of listing as a âcoming soonâ property, has been extremely effective in generating buzz. But, it can also attract early offers that may be made in haste.
âWeâre not even recommending to our sellers to accept those [offers], because whatâs happening is, then [the buyers] get in and then theyâre canceling or saying theyâll take it as is â but then they ask for things [later].â
Itâs a lot easier for buyers to âtalk the talkâ without âwalking the walkâ when they make an offer on a property thatâs still âcoming soonâ and hasnât been viewed in-person. Encourage sellers to consider those offers cautiously, always with an eye out for the most serious buyers.
Additional resources:
- 10 tips for buyers putting in offers sight unseen amid coronavirus
- Sight unseen luxury sales are taking place â with walkaway clauses
- 7 realities your buyers and sellers should prepare for in 2021
Pay attention to closing timeline
Another important consideration when sifting through offers is the length of time sellers want or need to close. In this market, buyers are willing to do almost anything to make sellers happy, including offering free rent back and providing a long closing time frame.
Have that conversation with the seller even before the offers start coming in so that you can be prepared to field buyer questions and understand what hierarchy time to close has on their list of priorities.
âSometimes they want a longer closing date, sometimes they want a shorter one, it just depends on their situation,â Benjamin said. âIâll always ask the seller, âWhatâs your ideal situation?â and let the buyers know writing the offer, âHereâs the sellerâs story and hereâs the best closing date for them.'â
Thomas also noted that closing time has largely been in the top three considerations for his seller clients right now.
Additional resources:
- Overwhelmed with multiple offers? Hereâs how to handle them better
- The closing process is painful! Someone disrupt it already
- 5 tips for closing every real estate deal ahead of schedule
- Closing Center 2.2 offers an enhanced, ramped-up preclosing experience
Presenting offers to clients
Seeing offers roll in on their home can be both exciting and overwhelming for sellers. Especially in markets where sellers are getting 20, 30 or 40 offers, an agentâs ability to organize them all in an easy-to-process manner is crucial.
A lot of agents find a basic spreadsheet, like one made on Microsoft Excel or Google Sheets, to do the trick in breaking things down. It doesnât necessarily have to be fancy, but if offers can be sorted and organized by price point, closing date, contingencies and other factors, it will be a lot easier to explain the value of each individual offer.
And it helps the agent present them in a very data-driven way that doesnât raise any Fair Housing issues.
âI like to neutralize the offers and just put them in a spreadsheet,â Ed Lyon, broker/owner at Preservation Properties in Newton, Massachusetts, told Inman. âThey donât know who the people are, so thereâs no Fair Housing buyer love letter issues or anything like that. It just takes the personalities out of it.â
At a recent Inman Connect Now workshop, Maura Neill of RE/MAX Around Atlanta Realty said she even color codes her offer comparison spreadsheets that she puts together for sellers so that itâs easier to highlight the different factors that are important to consider.
Additional resources:
- How to navigate multiple offers: It comes down to money
- Your ultimate guide to success with multiple offers
- Corral multiple iBuyer offers with new web app OfferBarn
Offer management and comparison tools
A few different offer management and comparison tools â often built into platforms that also offer other services â are also available for agents who prefer to explore more tech-based options.
Ribbon is a fintech startup that backs buyers with all-cash offers until their financing comes through. Agents can also write offers âon the goâ with Ribbonâs auto-fill feature, and compare received offers all within the platform. Ribbon also allows agents to communicate and negotiate with buyersâ agents within the platform, so that agents only need to go to one place to toggle everything related to received offers.
The company also announced this week its launch of an appraisal protection service, which may prove helpful during such a heated market. The service allows buyers who use RibbonCash Offers to make all-cash offers without worrying about appraisal contingencies because Ribbon will cover the difference for under-appraised listings.
WyzeGyde is another similar company, which just rebranded in late 2020 and shifted its focus to providing listing agents with tools targeted to sellers. The companyâs product helps listing agents dig into the comparative financials of different offers, but also allows for the sorting of offer terms so that whatever happens to be most important to a particular seller does not get overlooked.
If they so choose, agents can also use WyzeGydeâs Offer Fetch tool to send out a listing to iBuyers and Certified Cash Buyers for consideration. In addition, the companyâs platform also includes customer relationship management (CRM) integration setups to streamline information requests.
Tools like these can make offer management a lot more simple for a busy agent.
Additional resources:
- Cash offer startup Ribbon launches appraisal protection service
- Highly rated iBuyer offer aggregator rebrands and gets even better
- Zavvie rebrands iBuyer comparison tool for brokerages
Red flags to watch out for
Once an agent and their seller narrow down offers to those top finalists, itâs still important to keep a sharp eye out for any potential red flags that might be more smoothly folded into the offer.
Things like vague contingencies, a long inspection period or just a pre-approval letter that either has errors or seems to be putting forth the bare minimum recommendation for the buyer could all be red flags that might indicate the buyer isnât the most solid bet.
âI would say thereâs a lot of ways you can put in contingencies hidden in an offer that are sort of suspect,â Lyon said. âOr if youâre dealing with a builder, some sort of, like, approval from the city permitting to do something on the property thatâs ill-defined. If itâs a homeowner, it could be a long date on the purchase and sale.â
In Lyonâs state of Massachusetts, the purchase and sale contract is a two-step process, which potentially makes a seller vulnerable to a deal falling through. For instance, a buyer might only put down $1,000 earnest money, set the purchase and sale contract deadline for two weeks later, and then in that time, back out for whatever reason, having only lost the $1,000. âSo I like to do pretty quick timelines,â Lyon explained.
Collins similarly said that an extended inspection period gives a buyer more time to second-guess their decision, and in the meantime, the property may lose momentum.
âYou donât want to take it off the market and lose momentum to the wrong buyer,â Collins said. âYou want to make sure that theyâre not selling their house [or] they have other issues on their end. Things like that are important to look out for.â
Additional resources:
- 5 red flags that can kill a real estate deal
- Agents: Get your clients out of contingent offers before itâs too late
- Preparing for an inspection? 10 things sellers need to do
Keep consistent communication across all buyers
In an environment with so many offers flying around, itâs easy to lose track of how all buyers and their agents have been communicated with.
So as to not raise any Fair Housing issues, itâs important to keep communications to all buyers and their agents consistent across the board. An easy way to do this is to just compose any relevant updates and copy and paste those in messages to everyone who needs to be contacted.
At the aforementioned Connect Now workshop on navigating multiple offers, Maura Neill said one way she addresses this issue, once an offer has been accepted, is to have her seller write a thank you letter to all bidders, notifying them that an offer was chosen. That way, communication is coming from the seller directly without implicating the agent in any way, and the exact same explanation goes out to everyone.
Many listing agents are also keeping communications consistent by not accepting buyer love letters. The bidding method that allows buyers to pour out their compliments about a property to the sellers carries a number of Fair Housing risks. To keep things simple, and avoid liability, itâs probably best to just let buyers know those letters wonât be accepted in offers.
Additional resources:
- Who said what? 5 communication obstacles that can derail a transaction
- 7 buyerâs agent behaviors that need to stop
- How buyer love letters can land agents in ethics trouble
- Why homesellers shouldnât accept buyer âloveâ letters
Manage seller expectations
Real estate has been all over the news the last several months, and sellers have heard the word that now is their time to thrive.
Unfortunately, all that buzz could quickly go to a sellerâs head if there isnât some tempering of expectations.
âThey get caught up in a sensational news story about the aggressive market and people compare apples to oranges in real estate,â Lyon told Inman. âThere are lots of stories about houses that are very desirable â it could be the location, or it could be the size of the lot theyâre on, or the quality of whatâs inside the house. And if that person owns a house thatâs not nearly matching one of those things or all those things, itâs just a completely different number, so itâs really not a comparable kind of thing.â
Make sure to fill sellers in on what to expect for their specific market and property type at this time. Show them the data and how their house fits into the picture, Lyon said. That way, you should be on the same page when it comes to asking price, contract contingencies and more, and theyâll be prepared for the kind of offers that come in.
Itâs also a good idea to take into consideration the feelings of older homeowners who have been in a property for decades and are now deciding to move, Lyon said. In this market, that may begin happening more often, and itâs important to prep them for the emotional toll such a process might bring.
Especially given the pace of todayâs market, buyers may also be a bit more frank than usual about what upgrades or demolitions they deem necessary to a property, and catching any whiff of offhand remarks about outdated railings could just add more stress to an already stressful, emotional time for long-time homeowners.
So, despite all the hustle and bustle, donât forget to mentally and emotionally prepare sellers for their transition.
âWhile Iâm working with them, I try to get them to start thinking of the house in a more distant kind of mindset, that itâs almost like it soon will be a product on a shelf to people and itâs not going to be like a home as you see it,â Lyon said.
â[Thereâs] a lot of psychology there, [in] dealing with the sellers,â he added.
Additional resources: