Did you know that when there are two or more offers on a property, two types of offers
exist in this particular situation and it's all based on timing?
Well, today I'm going to explain to you what a competing or multiple offers situation looks
like versus a backup offer and what that is.
And because I get this question so much, I think it's going to be super valuable for
you.
So, make sure you stay until the end because I'll be providing tips and strategies, whether
you're a buyer or seller, and if you're in a multiple offer or a backup offer situation.
So, stay tuned.
One thing you might not know about me is I find the art and science of negotiating simply
fascinating. And one of the biggest assets you can have on your team is a realtor who
has strong negotiation skills. Because of my passion for it --
I approach every negotiation as if it were my own and I helped coach all my clients so
that they can gain the best outcome.
What's the difference between a multiple or competing offers situation versus a backup
offer?
I'm going to go over that right now, so let's start with multiple or competing offers.
So when you're in that situation, the timing is critical.
And what I mean by that is if there's two offers, for example, that come in at the same
time or slightly different timing, as long as both offers have not been accepted by the
seller in writing, then it is a multiple offer situation in which both parties or both buyer
parties are trying to buy this property at the same time.
Here's an example to help illustrate the process. Adam is a buyer who is ready to make an offer,
and I help him to submit an offer on a home for sale.
And the listing agent calls me right away and they say that we've received a second
offer, but it hasn't, it's not been accepted by the seller yet.
This means we are now competing with this second offer.
Now the process usually goes like -- both buyer parties are now made aware that there
is another offer on the table that they're now competing with, but the information and
particulars of those offers are not shared between the sides.
So it's important to note that this is not an auction style bidding war.
Usually those two offers are presented at the same time.
Usually the next step is each buyer party is going to have a chance to revise their
offer if they choose to do so. And they're going to put their best offer
and present it to the seller. And these are usually presented at the same time and the
seller’s going to pick one of them that they're going to accept and work with.
The one that is not chosen is going to be rejected.
Now I'm going to give you a few tips and strategies if you're a buyer in a multiple offer situation,
number one, you need to know as much information as possible about the seller, because knowledge
is power. Prices is usually a very important thing for
a seller, but it's not the only thing that you can negotiate in a real estate transaction.
In fact, you can negotiate anything. Other things that might be important to a
seller are either the possession date or maybe the terms and conditions you write into your
offer or even the deposit amount. So, knowing the most information about the
motivation and situation for the seller, it's going to help you formulate the best offer
that you can make. That's going to be tailored to what the seller needs out of the transaction,
as long as you're okay with it,
and this way it's going to make it much easier for the seller to accept your offer versus
the other competing offer. At the end of the day, the sellers are not
in a position where they need to tell us anything about their situation or motivation.
So we always try to get as much information as we can.
And that's why I always ask a lot of questions, because if you don't ask, then you just are
not going to get it. There is a perception that if you're buying
in a multiple offer situation, that you're going to overpay for a property. You might
pay a little bit less than this price, or you might pay above market value, but let's
put it to you this way. If the home is the best fit for how you envision the home, enhancing
your lifestyle for years and years to come, then you have to ask yourself, what is that
worth?
Because in my opinion, the best fit home and being able to gain that happiness of how you
want to live your life is in itself priceless. Here's some tips and strategies. If you're
a seller in a multiple offer situation, our job here is to get you as many people interested
in making a written offer on your property and competing on it so that we can get as
much as we can from it. Be careful though, because there are buyers
out there that might be interested in your property, but are strictly not willing to
compete with others on your home and will drop out of the race.
This is especially true. If your home is not super unique in your area, or there are other
substitute listings that are priced similarly. So you might want to consider your strategy
carefully, want to keep as many buyer parties interested without scaring them off.
So, we want to project a very fair handling
of how this multiple offer is going to go. And also, what we need to do is we need to
provide a little bit of sense of urgency and give them a deadline of when they're going
to submit a revised offer and when you're going to actually present it to your seller
so that they know that we're going to handle it the right way.
I'm a strong advocate, not using high pressured tactics to force a buyer to comply and to
submit an offer because they typically don't work.
And this is not how you want to start a negotiation, because if the gap is too big between buyer
and seller or the buyer feels like they're pressured into it, then simply going to deter
the buyer from making an offer altogether. I always focus on value and be as fair as
possible and not give any key information away about my seller's position.
This way, the natural motivation and market
forces are going to come into play and we're going to get the offers and oftentimes you
can get the best outcome possible. Now the second type of offer is backup offer.
Let's give you an example. The Smiths are selling their home and an offer
comes in and we negotiate it and end up accepting that offer.
Now the very next day, a second offer comes in from a different buyer and it's much more
favorable on the price and the terms and conditions. And we end up negotiating that one, them being
aware that it is a backup offer. And we ended up accepting that one as well.
And Mr. Smith comes to me and he says, look, the second offer is much better, better on
price. It's what we want. It's what session date can we accept that one? The simple answer
is no you've already accept the first offer, which becomes the first position.
And the second one is now your backup offer.
In Alberta and accepted offer a deal is conditions precedent, which means that these conditions
need to be waived or removed for it to become a firm deal.
A non-waiver or non-removal of these conditions by either side for their conditions means
that it kills the deal. Having a backup offer is often overlooked
as a great thing, because now we know as a seller, there's at least one buyer out there
who's willing to put the time and effort needed to write and negotiate a backup offer, even
if there’s a pretty good chance the first offer will proceed.
One strategy you can use as a seller to gain advantage is you use that backup offer as
leverage to gain more favorable terms against that first offer for example, during a negotiation
for home inspection items that come up.
Here are a few tips for you if you're a buyer, if the home is a great vision for you, and
there are no other homes that really match or even come close, then you may want to consider
putting a backup offer. Most deals do proceed so your expectation
is that you're putting your best foot forward and giving yourself the opportunity in case
the first offer falls through that, you'll be able to buy this home.
You want to make sure that your backup offer contract is airtight. And I always add extra
language in there, to protect my buyer clients and I'll leave that in the description below
and the purpose of that is this is to make sure that there's no question when that first
offer does not go through that ours is going to slide into that first position immediately.
Another strategy you can increase your chances to win as a backup offer is you can make a
very, very good offer that is hard to resist for a seller.
And that could mean things like better price
by a large margin, a better possession date for them, or perhaps less terms and conditions
such as no financing if you're able to make cash deal.
Your goal is to sway the seller enough so that they're going to consider your backup
offer as the better offer. And that's going to entice them to make it
a little bit more difficult for the buyer of the first offer to proceed. Did you guys
learn anything today? If you did put that in the comment section below and any questions
that you may have, make sure you like and subscribe to our channel because we're coming
up with weekly videos to help you. My name is Jasben Lai with the LiveInnerCity
real estate team, always helping you keep real estate simple.
See you next time.