I may have an unpopular viewpoint on this. But multiple offer markets tend to bring out some practices that may complicate transactions and create a lot of chaos.
Offer deadline dates. There are pros and cons to this. People at least know how long they have to show the property or when they need to write and submit. However, the agent usually has no idea how many offers there will ultimately be, and is often inundated with them. What is wrong with accepting offers as they come in, and just presenting them to the seller? Agents and buyers know that there are multiple offers out there and are apt to write a strong one right from the get-go.
Specific lender Pre-approval requirements. I understand that on a bank owned property but don't see the need for it on regular sales. Pre-approval letters need to mean something, and if the offer is good and the listing agent has questions, then by all means call the lender and verify. That's a good practice any time. If the buyer has chosen a lender, they are often reluctant to give someone they don't know all of their personal financial information. Is the seller making this mandate?
As-Is language in the counter offers. All contracts in California are as-is. Putting this language into a counter doesn't mean that the buyer will stick it out with an over-asking price offer on a house with lots of expensive damage that wasn't visible or disclosed. Sometimes listing agents act surprised when a request for repair is forthcoming. It is still the buyer's right to ask, and the seller's right to say no. But will those back-up buyers want to match this highest and best offer when they learn about expensive property deficiencies?
Risky Business. This type of market brings out other risky elements, such as no contingency offers. This is rarely a good idea and the California Residential Purchase Agreement is filled with language advising buyers to keep them in place. Yet seller's agents often issue counters to buyers with such requirements.
The sellers are exhausted. They are pretty over-whelmed by the multiple-offer review process. Many express the emotions of stress, anxiety and indecision. Then even feel guilt at all of the nice folks they have to turn away.Some of them are dealing with the pressures of writing offers to find a replacement home and are dealing with multiples offers on the buy side as well.
A multiple offer market is hard, but as agents on either side of the equation, there are things we can do to minimize the chaos. I suggest we try our best to do so, for everyone's benefit.
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While I understand your viewpoint, the fact is there is never truly a "regular market"-it changes constantly.
Karen- somelisting agents can be hard todeal with but then again itmay be their clients. I also donot like the requirement of getting pre-approved with a certain bank.
Offer Deadline Dates: I can see how these can sprung up because it's tiring to review dozens of offers. After a point, you're just killing time quibbling over small amounts. Once the list price is met with favorable terms, you owe it to your client to close a deal instead of stringing out the showing period in search of bigger fish. Are you truly working in your client's interest or just trying to get a bigger commission check?
Additionally, since most buyers are flocking to fewer and fewer available homes, those homes are getting a lot of traffic. That new carpet is getting traffic stains just from visitors. I talked to a listing agent who said his client almost took the house off the market because of all the visitors and their carelessness inside the house, resulting in damage!
If you have 100 visitors and no offers, you need to fix the property, not keep the doors open longer just so 500 more can look around and hold their nose.
Specific Lender Pre-approval Requirements: Sellers are getting frustrated by banks that can't deliver. How many houses have you noticed that disappear off the market in days, then re-appear two weeks later? Oh, the buyer wasn't really pre-approved. If your buyer is too nervous to face the scrutiny of pre-approval, perhaps now is not the time for them to be out looking at houses. The market is not being forgiving to people who want to bid high and then try to nit-pick the price back down. Go big or don't come to my house, has become the cry of sellers.
The Sellers Are Exhausted: They shouldn't be. We should be prepping them for what's coming, and setting an orderly method for reviewing offers. If that means pre-sort and review later, or only look at one offer per night, let's set that schedule for them and shield them from the stress. Are we telling them they can stop looking at offers any time they want to? Are we telling them when an offer meets all the pre-requisites we discussed with them when listing the home?
We have been dealing with multiple offers for a while...it need not be stressful....but exciting...developing an easily understood speadsheet of comparison is not difficult and makes the whole process a very smooth one.
Karen, I can see you point, but that may be in a perfect world. Our job is to make it less stressful for the sellers when dealing with multiple offers. Buyers do have to understand that in a market of multiple offers, they may not get another chance.
The word REGULAR is going to take days of discussion...It is like saying NORMAL which I do not recall either.
I experienced the no contigency offers in which some buyers did get in trouble with the home. It is best to practice per the contract. Hey, Dorothy got in trouble every time she got off the yellow brick road.
As for the pre-approval letters, I'm with you on this one. When I've pre-approved a buyer and they are told they need to obtain a pre-approval from someone else --- even on bank-owned --- they hate it. It's as if to say, "What? My money isn't green?"
Still, we do what we must. At the end of the day, we're all in the business of working to get things done and buyers and sellers can learn from the example we set.
Having been in several multiple offer situations, I can say that the deadline is a twin edge sword. On the one hand, it means we all have to get our offers in at the same time. The downside is that it prevents pre-emptive offers. In my experience in tough markets (Palo Alto, Cupertino, etc), getting an offer in quickly seldom wins because the selling agent ends up telling the seller something like "If the first offer is this good, imagine how good the others will be!" and then all the buyers are essentially forced to outbid on another - good for the seller but not for the buyers.
Amen Rich! I would never show a client a home without them showing me their POF. My time is worth money.
I feel for sellers it is a stressful time for all. Thank you for this article!
Karen - Agents are exhausted too. I've been on one end or the other of several multiple offer situation during the past two week. I'm keeping a low profile this long weekend and trying to recuperate from a very wild and crazy 90 hour work week. I'm hoping the market will even out this fall--late summer has been chaotic.
Karen - It's hard on either side of this. There are buyers making 8, 10 and more offers just to get an acceptance, and a seller who gets so many offers can also be overwhelmed.
Karen, first, this is a great problem to have. You have a buyer's agent orientation, and that's fine. I think setting up a deadline reduces chaos and hard feelings. Otherwise, the listing agent is receiving new offers while he/she is presenting the first offer. It's not uncommon in a hot market to be getting ready to send out the counter-offer to the agent and another offer is received. Gets too messy and lots of bad feelings. First-come, First-serve creates pushy, aggressive agents in a hurry to be first. Also, no one knows what the market value is until you give the market time to respond to the listing. The listing agent owes that to the seller. I don't like non-contingent offers but I do like pre-listing inspections so the buyer knows the condition prior to making an offer. Excellent post and I'm sure you'll get lots of opinions.
Karen,
You have made some interesting points that have stimulated great comments. I will only key on one item.
Offer deadlines: important if the listing really is expected to generate multiple offers. The offers need to be managed and that is easier when they all come in by a specified date. The deadline can be embarrassing when no offers come in. The deadline is annoying when it is 24 hours after the only time the property can be seen during a “limited showing” for two hours on a Saturday morning. No, I did not make that up.
Karen The challenge is to keep the process professional - just because there is a multiple offer on my property I need to realize the tables may be turned when it's my buyer who is making offers. My attitude will be different when I am handed a deadline
A well deserved feature Karen. I agree with your thinking on getting offers to clients right away. The only times I see deadline dates on offers is when there is a property that is clearly in demand with a very low price and the Seller wanting to get the job done in a hurry.