I received an email from the National Association of Realtors (NAR) this morning with the headline “NAR Data Shows 5 Offers Per Home Sold.”
While a boon to sellers to receive multiple offers, with a multitude of purchase agreements flooding in on almost every listing, I believe it is too easy for listing agents to become complacent and look for shortcuts. Here is the process we use to ensure we get the highest and best for our clients.
In our region, to be competitive, most offers are coming in significantly over asking price and fully non-contingent (loan, appraisal, inspection and any other contingencies fully removed).
Consequently, many agents, awash in multiple offers, simply recommend to the seller that they take the highest one and call it a day.
Personally, I think this approach signifies a failure of the agent to fulfill their fiduciary responsibility to the seller to get the highest and best offer and terms. In my mind, receiving a high number of multiple offers is just the beginning.
Provide everything upfront
To ensure a potential buyer has everything they need to make an informed decision and to set the stage for non-contingent offers, we provide a full complement of documentation to all prospective buyers.
Although this approach takes a lot of work upfront, it reduces the workload once in contract and removes the potential for delays. We ask that all prospective buyers go through the package and sign a statement verifying that they have received and read the package in its entirety.
I understand that practices change from region to region, but this is normal practice in our hyper-competitive San Francisco Bay Area market.
We include the following:
- Cover letter, including terms the seller would like to see (potential rentback, projected closing dates, special needs, etc.), specific information any potential buyer needs to know, offer deadline (if applicable), closing information and instructions for writing effective offers (for example, we ask for a copy of the buyer’s pre-approval letter and verification of funds for both the good faith deposit and down payment)
- Full seller disclosures completely filled out
- Preliminary title report
- Full range of inspections (varies from region to region — typically includes wood-destroying pest, home, and roof inspections, but could include radon, pool, foundation, soils, septic, well, and whatever other inspections would be considered normal)
- Full HOA or co-op documentation, covenants, conditions and restrictions (CC&Rs), etc.
- Natural hazard disclosure (if required)
- Home warranty (in our region, sellers pay and a home warranty is expected with every sale)
- Comprehensive list of upgrades and repairs
- FAQ — this covers questions that potential buyers usually ask, including:
- Why is the seller moving?
- Have any upgrades or repairs been made?
- What is included or not included in the sale?
- What did the sellers love most about the home and area?
- Is there an offer deadline?
- Will the seller accept preemptive offers?
Set an offer deadline
We want to build anticipation and competition, so we set a concrete offer deadline (day and time) and state that we will not entertain preemptive offers. Occasionally, I see a listing in the MLS that includes both an offer deadline and a statement that allows offers before the deadline.
This completely nullifies having a deadline and opens the door for a free-for-all.
This not only completely undermines what we are hoping to achieve by setting a deadline, it always leaves the seller guessing about whether they got the highest offer possible.
By law we are required to show preemptive offers to the sellers if any do come in, but we also counsel them as to the benefits of waiting until the deadline.
Even though we state upfront we will not accept preemptives, we always get buyer’s agents who ask if they can fire in immediate offers. When I explain that I will (i) show their offer to the owner, (ii) counsel the seller to wait, and then (iii) use the offer as leverage to get higher offers at the deadline, buyer’s agents choose to wait.
Process offers as they come in
As offers begin to arrive, we forward them to our clients so they can see the activity in real-time. We choose to do this to maintain a 100 percent transparency policy. A seller never has to worry about whether an offer has come that we have not communicated to them.
Only occasionally do we get a seller who only wants a summary; most are eager to get the offers and monitor activity. Some sellers even use this opportunity to do a deeper dive on the potential buyers.
We use a virtual assistant to sort the offers as they arrive and enter the terms on a sortable offer spreadsheet, starting with the highest price and descending. If we have a ridiculous number of offers, we focus on entering full information for the highest offers only and have a secondary section where we include only the basic info for the remaining offers.
Because the seller already has all the offers in their inbox, they have full access to all the information, should they wish to examine every line of every offer. If they want additional info on any given offer, we get it for them.
Once all the offers are in and the spreadsheet is complete, we email that over to the seller as well.
Set a meeting with the seller
Once we have verified that we will have offers to examine, we set a Zoom meeting with the seller to go over everything.
Prior to the meeting, we will have done the following:
- Sent the offers to the seller
- Carefully examined all the offers and contacted buyer’s agents with questions as applicable
- Sent the final offer spreadsheet to the seller
- Checked with lenders to verify the financing and available funds as applicable
- Contacted the buyer’s agents who have made the final cut to let them know we need them to be available to potentially receive a phone call during our meeting with the seller.
Work the phones
We frequently hear from buyer’s agents that they want an opportunity to tweak their client’s offer if necessary. We discuss this strategy with the seller so they are on board, and then proceed with the top few offers.
For example, we had a recent sale listed at $1,599,950. It was a spectacular home, but there were no recent comparable sales that were any higher, so we concluded the list price was a fair place to start. From the outset, we communicated to all buyer agents that the seller was anticipating offers above the starting price listed on the MLS.
We put the home on the market on a Wednesday, scheduled showings through the weekend and had an offer deadline at noon the following Monday. We had eight offers, three of which were between list price and $1,750,000; four that ranged between $1,800,000 and $1,880,000; and a final one at $1,950,000.
We called the four offers in the $1.8 million to $1.88 million range and let them know that the number to beat was $1,950,000.
Two of them said they could not go that high. One said they would match the $1,950,000, and the final buyer let us know that they were willing to offer $2 million, but that their offer was only good for the duration of their call. With them on hold, we contacted the seller who immediately told us to take it.
Bottom line, we managed to get our sellers a fully non-contingent offer $400,000 over list price, establishing a new record high for the entire city. We had verified the buyer’s finances prior to accepting the deal, so we knew that even if it appraises low (which it did), they had enough cash reserves to make up the difference.
Had all four offers refused to budge, then we would have gone back and accepted the offer at $1,950,000. By taking the extra effort, we secured an additional $50,000 for our seller, who, needless to say, was absolutely thrilled.
It takes extra work, but at the end of the day, the sellers are completely satisfied that they got the best price and terms possible and you, as an agent, have demonstrated that you have gone the extra mile for your client.
Testimonials are always easier to get when clients are happy. Take a shortcut, however, and you will leave them guessing and questioning whether they might have received more had they worked with a different agent with a more diligent endgame.
Carl Medford is the CEO of The Medford Team.
