When I was actively selling real estate in Southern California, multiple offers were a fact of life. While you may think that receiving two or more offers on one of your listings is a great situation to be in, actually it’s not. For properties that sell with a single offer, the fallout rate is 10 percent. For properties where there are two or more offers, the fallout rate increases to 50 percent.

The reason there is such a significant difference in closing rates is that buyers often feel they were unduly pressured by the multiple-offer situation. After buyers have time to reflect upon the situation, they often end up resenting both the agents and the seller. To minimize the hard feelings as well as the very real potential for litigation, here are 10 guidelines for handling multiple offers that maximize your odds for success.

Editor’s note: This is the first in a two-part series.

When I was actively selling real estate in Southern California, multiple offers were a fact of life. While you may think that receiving two or more offers on one of your listings is a great situation to be in, actually it’s not. For properties that sell with a single offer, the fallout rate is 10 percent. For properties where there are two or more offers, the fallout rate increases to 50 percent.

The reason there is such a significant difference in closing rates is that buyers often feel they were unduly pressured by the multiple-offer situation. After buyers have time to reflect upon the situation, they often end up resenting both the agents and the seller. To minimize the hard feelings as well as the very real potential for litigation, here are 10 guidelines for handling multiple offers that maximize your odds for success.

1. Make sure a manager is present
Although your company may not have this policy, it’s still smart to ask your manager to be present. Ask the buyers’ agents and your sellers to come to your office since your manager will be overseeing the multiple-offer process. Difficult people often behave themselves when they know management is involved. This also gives you better control of the situation as well as insuring that you will have all the tools you need to handle the situation.

2. It may be legal to shop your offers, but is it the right thing to do?
In some states it is legal to tell the buyers how much the competing offers actually are. In other states it is unethical to disclose the contents of competing offers. Make sure you are familiar with the policy in your state. Even if you do have the right to disclose the other offers, putting people into a bidding war often results in buyer remorse that can lead to your sale falling apart. Instead, ask all buyers to bring back their best offer. This increases the probability that your deal will actually close.

3. Logistics
Explain the presentation guidelines to each agent who presents their offer prior to hearing the offer. This includes when any counteroffers may be due. If the agents representing the buyers are presenting their offers in person, have them present their offers privately, one at a time.

4. It’s the sellers’ house, and it’s the sellers’ decision
Let the sellers decide which offer they want to accept or if they want to counter all the offers. If the seller decides to make a counteroffer, it’s smart to counter all the offers. You never know who will step up to the plate to complete the purchase. Also, the counteroffers do not have to be the same. Your sellers may counter them any way they choose. Be advised, however, that it is not unusual to have the sellers make a counteroffer and have both sets of buyers walk away from the situation.

5. When you have your own offer
If you have your own offer on your own listing, your manager should represent the seller to keep the situation fair as well as to avoid any problems with agency. You will represent your buyer. (The manager should not disclose the terms of the other offer to you until the negotiation is finished. At this point you may step in to handle the remainder of the transaction.)

6. Avoid selling your listing twice
CAVEAT: If you issue more than one multiple counteroffer, make sure it includes language drawn up by your association, real estate commission or an attorney. The gist of the language should be:

"Buyer’s signature on this multiple counteroffer does not constitute an accepted offer until it is countersigned a second time by the Seller."

What this means is the seller will sign the counteroffer, the buyer will sign it, but it will not be binding until the seller signs the second time.

7. Don’t make it a race
Have all parties agree on when to reconvene to consider the buyer’s responses to the seller’s counteroffer. Turning a multiple-offer negotiation into a race doesn’t benefit the seller and it greatly increases the likelihood that the transaction won’t close. Usually 18-24 hours is sufficient.

8. Ask for the buyer’s best offer
Advise the buyer that the seller will be making his final decision on the multiple offers at this second meeting. Ask the buyer to bring back her best offer. If you issue an additional counteroffer beyond this point, the buyers may both walk away. If you need to clean up some minor points, an additional counter may be appropriate. Countering over the price the seller chose on his first counteroffer, however, will usually cost him the transaction.

9. No verbal negotiations
Always make sure that everything is done in writing — no verbal negotiations no matter what. Furthermore, never sign on behalf of the seller — use one of the digital document signing services such as DocuSign, scan and email it, or even fax it.

10. Proceed with caution
If you have a counteroffer out and you receive a new offer that is better than the one on which you are negotiating, immediately check with your manager regarding what your company policy is. In many cases, rescinding the existing offer can lead to litigation. The best course of action is to allow the existing counteroffer to expire and then counter both offers as a new multiple counteroffer. In some companies, their policy is "first in, first negotiated." What this means is that the seller must conclude the negotiation with the first buyer before he can respond to the second offer.

Need more help with multiple offers? If so, see Part 2 of this series.

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