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Receiving more than one offer on your home feels like a dream, but navigating the murky waters of offer disclosure and negotiation can be overwhelming. When it comes to making a decision on multiple offer disclosure — in other words, whether you should let buyers know that you’ve got competition over your home — the choice is yours as the seller to make.
However, a skilled real estate agent can help you develop a smart and ethical strategy. Read on to learn more about the intricacies of handling multiple offers and the best practices for disclosure.
Do you have to disclose multiple offers on your home?
Short answer? No. It all depends on the strategy you’ve outlined with your agent, explains top-selling Boston-area real estate agent David Shorey.
“When I’m the listing agent, I sign a contract with the seller where we agree on how to handle offers that come in [upfront],” Shorey explains.
When it comes to disclosure, the seller has three options:
- Disclose nothing to buyers, including the existence of other offers.
- Disclose the existence of multiple offers to the buyers, but not offer amounts or terms.
- Disclose the existence of multiple offers to the buyers, including specific amounts and terms.
“Most sellers choose the second option,” Shorey explains. “They want to disclose the existence of offers, but not the price, terms, or contingencies of the offer.”
However, Shorey clarifies, sellers are welcome to change their minds about offer disclosure at any time, even after the listing agreement is signed. Ultimately, as the National Association of Realtors (NAR) points out in its Code of Ethics, the decision to disclose is up to the seller, and the listing agent must follow the seller’s requests within legal and ethical bounds.
When disclosing can bring legal trouble
NAR’s Code of Ethics also requires real estate agents “to be honest with all parties.” So an ethical listing agent isn’t going to lie about multiple offers on a property to stoke competition. False information like that isn’t only unethical, but can potentially get a seller into legal hot water.
Another strategy to approach with caution is offer-shopping, i.e., when a seller discloses the terms of one buyer’s offer to other potential buyers. Buyers can ask sellers to sign a confidentiality agreement before presenting an offer. If the seller signs the agreement, they can no longer share the specific terms of that offer with other interested buyers without facing potential legal trouble.
Benefits of disclosing offers
“I think, as a seller, it makes a lot of sense to disclose that you have multiple offers to all buyers,” Shorey says. “Many times that will encourage buyers to improve their offers.”
Here’s how disclosing other offers could benefit you:
It could push one of the buyers to make a higher offer.
Buyers don’t typically make their best offer right out of the gate. Letting buyers know there are other offers on the table could get them closer to their “best” offer.
You may get more than a price boost.
Counteroffers won’t always mean more money, they could spell more favorable terms for you. If buyers know there are other competitive offers out there, they might waive the appraisal, inspection, or other contingencies. They could counter with a larger earnest money deposit, a shorter closing, or cover closing costs entirely.
Drawbacks of disclosing offers
Disclosing multiple offers does come with its own inherent risks. Depending on your market, and the guidance of your agent, you might decide these negatives outweigh the benefits:
It can scare away buyers.
Telling buyers that there’s competition for the home could discourage them from making additional offers. They might withdraw their offer altogether because they don’t want to enter a bidding war.
You may face communication challenges.
Weighing multiple offers on your home can be exciting, but it’s also stressful to keep track of what’s what with lots of offers on the table. Sellers aren’t obligated to respond to all offers, but a buyer might rescind their offer if they feel it’s being ignored.
It could create a longer journey to closing.
A standard home closing takes 48 days on average, according to Ellie Mae, and if you’re in a time crunch, ongoing bidding wars and negotiations can prolong your overall days on market. Offers and counteroffers typically take place within a 24-48 hour window, but each round can add days to your timeline.
What are your main options in a multiple offer scenario?
A multiple offer scenario happens when two or more buyers make offers on a home at around the same time. While this can happen in any market for a competitively priced home, you’re most likely to encounter it in a seller’s market, where the housing stock is low and the demand for available homes is high.
When you receive multiple offers on your home, you have a few options as to how to proceed next:
- Take the best offer.
A seller can simply accept the best offer that rolls in, rejecting the rest right off the bat.
- Inform all buyers of the existing offers on the table, then ask for counters or best offers.
Buyers who are still interested can counter with their “best” offer.
- Let buyers know of the best offer on the table, and ask them to beat it.
That means disclosing the terms of the best offer, and asking other interested parties to match (or beat) said offer.
- Counter one offer, and reject the rest.
One buyer’s offer might seem more promising than the rest, and you can choose to counter that offer while simultaneously rejecting the others.
For more advice on each route, consult our guide to navigating multiple offers.
Handling multiple offers on your home
No two multiple offer scenarios will be the same, but there are some common mistakes that all sellers can learn from and avoid:
Determine your priorities before you list your home.
Knowing what you want before you get it can help you work through a multiple offer scenario with less stress. Shorey asks his sellers to consider their top priorities before even listing the home. Do you want the highest price? A swift closing process? Waived contingencies? Knowing that before you enter the market can make it easier to settle on an offer once they start rolling in.
Decide what you want to disclose before multiple offers appear.
Similar to knowing what you want out of the sale, you should also know how you want to handle the sale of your home before it even takes place. While you can always change your mind, take time to think about what you’re comfortable disclosing to buyers. Do you want a bidding war scenario? Or would you be more comfortable talking to a promising buyer one-on-one?
Don’t let the window for negotiations close.
Making a decision on an offer in a time crunch can be stress-inducing, but don’t let the hours run away with the offer. Some offers may include a “time is of the essence” clause, which means if you don’t respond to an offer within a “reasonable window,” the offer is void. Plus, respectfully responding to offers within the traditional 48-hour window makes for a happier buyer who might be more willing to negotiate.
Disclose when you’re under contract to other potential buyers.
Once you accept an offer from a buyer, you should let all other parties know that your property is under contract. It’s not only polite but neglecting to do so can violate NAR’s Code of Ethics.
Counteroffers void previous offers.
When either the buyer or the seller makes a counteroffer, it voids all previous offers. So, once you make a counteroffer to a buyer, all earlier offers are off the table.
Accepting an offer doesn’t mean the end of negotiations.
Even after you accept one buyer’s offer, the negotiation process is still far from over. There’s still the appraisal and the inspection to consider. If an unexpected issue crops up during the inspection or your home appraisal comes in low, you may encounter a delayed settlement where terms can be renegotiated.
Remember, it’s your decision to disclose or not disclose
At the end of the day, your agent is there to represent your best wishes and interests. Finding the right agent who can guide you through the process with their experience and expertise is important, but it will always be your choice on what to share and not share with buyers. Doing so can, in many cases, lead to more compelling offers as long as you act in a timely manner with respect to the buyers.
Disclaimer: Information in this blog post is meant to be used as a helpful guide, not legal advice. If you need legal help with a real estate contract or negotiation scenario, please consult a skilled lawyer in your area.
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