How should I negotiate Multiple offer situations?
QUESTION: How do I help my Buyer or Seller who is in a Multiple offer situation?
ANSWER: If you find yourself in a Multiple offer situation with a Buyer or Seller, you have some options. Typically as a Buyers agent you may not know that there are other offers until you make one for your Buyer. However sometimes you do know upfront that you will be competing with other Buyers. Make sure you advise your Buyer of this, so that they can make their offer as strong as possible. This can be done in a few different ways. First and foremost, have them make their offer at the best price they can. You shouldn't tell a Buyer what to offer, however show them comps and have them make their offer as strong as possible. Secondly advise them to shorten all of their deadlines as much as possible. Check with Buyers lender to advise you of the best possible deadlines to use. Thirdly, Buyer could release some Earnest money to the Seller after the Due Diligence or the Financing and Appraisal deadline, whichever is later (section 8.4 of REPC). This assures the Seller will receive some money in the event the sale fails. Earnest money is important and a strong Earnest Money deposit is also advantageous. I recommend no less than 1% or 2% of purchase price. Some Buyers are willing to pay more than asking price for a property. This is sometimes a bit risky because the property may not appraise. Advise your Buyer of this beforehand, so that they are aware of this possibility.
Once your offer has been made, a Seller has some options as well. They can use either UAR form 22 or 24. Form 24 is simply the Seller's notice to Buyer that they have received multiple offers. Rather than accept, reject, or counter any offer, they ask the Buyer to present his/her best offer. Then they reserve the right to examine each offer. To be fair to all, Seller gives a response deadline for each Buyer to present their best offer. Seller agrees not to accept any offer prior to the response deadline. After the deadline, Seller can accept, reject or counter any of the offers.
Form 22 is more specific. This form gives notice that Seller has received multiple offers. Rather than accept any of the offers, Seller elects to provide each Buyer with a counter offer. Seller gives Buyers a time to respond. Even if a Buyer accepts Sellers counter offer, Seller shall not be obligated to sell property to Buyer, and there is no binding contract unless Buyer receives a written notification from Seller by the deadline provided. If by the deadline Seller does not give a notice in writing, the counter offer and any other negotiations or agreements between Buyer and Seller shall become null and void. Buyer will receive their Earnest money back at that point.
Form 23 is a Multiple offer Disclosure. This form is normally provided to Seller at the time of taking the listing, It explains the possible scenario's that may happen with Multiple offers. Each option has some risks and this form helps the Seller to navigate through these scenario's.
Read all of these forms and become familiar with them so that you can represent your client in the best manner possible.
It's best to use one of these forms to address these types of situations rather than trying to provide your own language on a regular addendum Remember we are not attorney's and shouldn't be trying to create language of our own.