How to Handle Multiple Offers on a House

You might receive multiple offers if you have a desirable home in a seller’s market. This is the dream for most homeowners because it means you can move forward with the sale process and don’t have to keep scheduling showings.

However, it can be hard to evaluate multiple offers and choose the best one. Your real estate agent is required to present any offer to you, but they can’t tell you which one to choose. Picking the wrong offer could mean losing money or dealing with difficult and unreliable buyers.

Your real estate agent should review each offer with you and identify which criteria are standard in your area and which requests are unique or unexpected. This can provide context about the offer.

Use this guide to learn how to handle multiple offers on a house so you feel confident moving forward. 

1. Review Offer Terms

The first step is to read each offer and identify key terms that both parties agree to. The offer will explain how much the buyer is willing to pay for the house and how they plan to complete the purchase. Every offer is a story that can be negotiated with the seller. The offer terms include: 

• Price: The price is often the first thing that sellers look at. When reviewing multiple competing offers, start by comparing which price is higher. This is an excellent starting point but doesn’t paint the full picture of the offer. 
• Financing: This information documents whether the buyer will be paying with cash or will need to apply for the mortgage. If you don’t receive a cash offer, the bid should review the size of the down payment and the type of loan the buyer plans to apply for. 
• Home Inspection: This will provide a window for the inspection period and whether the buyer plans to schedule one. In some markets, buyers will waive inspections to make their bids stand out; however, these are required for home purchases with financing. 
• Additional Contingencies: The home inspection is one contingency, but one of the offers you receive might have others. For example, you could receive a bid with a home-sale contingency, which means you can’t close on the sale until your buyer sells their home first. 
• Closing Date: This is how soon you can move. Some people want shorter closing periods so they can move out faster. 

As a seller, decide what is most important to you in a home sale. You might receive an offer at your listing price that comes with several contingencies. The other bid might be lower but with other favorable terms. Your risk priorities determine which one you accept. 

2. Compare Net Proceeds

The net proceeds are the profits you receive from the home sale after all of the expenses are subtracted. While you might receive multiple offers, the one with the highest price might not be the most profitable. 

To compare net proceeds, take the purchase price and subtract the remaining mortgage you have on the home, along with any fees from your bank for paying it off early. Then, estimate the agent commissions on the sale and subtract those from your profits as well. Finally, read the terms to see if there are any closing cost concessions in the bids. Your buyers might ask you to pay certain costs in order to close quickly. 

Your real estate agent might be able to break down the net proceeds of multiple offers so you can see which ones are more financially lucrative to you. This could help you pick the best one.

3. Assess Buyer Qualifications

The final step after calculating your net proceeds is to evaluate the risks that come with each offer. For example, cash bids are considered less risky in real estate because the financing is unlikely to fall through. A lender could deny a loan to a buyer, preventing them from purchasing your property. Other contingencies, like home-sale contingencies or bids with long closing windows, also affect the overall risk of the offer. 

As the seller with multiple offers, you get to decide whether you feel comfortable accepting a riskier bid for a higher profit or if you prefer to go a safer route.

4. Set a Deadline for Offers

Sellers often receive multiple offers after a busy weekend that is packed with showings or following an open house. The offers come within a few days of each other after the buyers have time to review their bids. 

If you don’t want bids constantly trickling in, set a deadline for when you will accept offers. For example, if you have an open house on a Sunday, state that you will no longer accept bids after Tuesday at 5 pm. It’s not fair to keep your other buyers in the dark for several days because you are waiting for a few more bids. 

Most buyer’s agents contact listing brokers to let them know that an offer is coming. When your listing broker receives this call, they can state the offer deadline. Once the deadline passes, you can review all of the offers at once.

5. Request Best and Final Offers

In the best-case scenario, your buyers will enter into a bidding war with each other. They will continue submitting offers to outbid their competitors and win your home. While a bidding war is exciting for sellers, it can also be stressful. It can prolong the offer period, preventing sellers from going under contract. Sellers also risk losing quality buyers who don’t want to engage in the spirited competition. 

One way to end a bidding war is to request their best and final offers. This is the absolute maximum that your buyers are willing to offer to your home. After these offers, you will not accept any more bids. From there, you can choose the best offer and move forward with the sale process.

6. Check for Escalation Clauses

An escalation clause is used by buyers to automatically increase their bids above other offers. The escalation clause details how high a buyer is willing to go to win the house. Instead of going through a manual bidding war, this clause can keep the buyer competitive without requiring them to submit multiple bids. 

For example, a buyer might bid $375,000 on a house with an escalation clause of up to $400,000. If another buyer places a bid for $395,000 then the $400,000 escalation clause on the initial offer kicks in. However, if a third bidder offers $405,000 then the first bidder would lose out because the bid went above their escalation clause limits. 

You can see if an offer has an escalation clause when you first receive it. This gives you an idea of how eager the potential buyer is to own your house. 

7. Consider a Counteroffer

As a seller, you can still counter bids when you receive multiple offers. Your buyers are aware that there are multiple interested parties and they want to make their bids as appealing as possible. If something is holding a bid back, like a longer closing period, some buyers might be willing to adjust their offers to be accepted. 

You can also submit multiple counteroffers to bidders. This can help you determine which ones are the most flexible to your needs. Remember that buyers can walk away at any time, so you don’t want your counter offers to be unreasonable. Your goal is to reach a fair agreement for everyone involved so each party wants to see a successful transaction. 

8. Notify All Buyers

The final step after you review each final offer is to choose your future buyer. In the same way that you set a deadline to receive bids, let your bidders know when you will make a decision. Your buyers need to know whether they are moving forward with the sale or returning to the house-hunting state of the process. 

You are welcome to provide feedback to the bidders who submitted offers you did not accept. You might highlight how the top bid was an all-cash offer or how it had fewer contingencies. Oftentimes, these factors are out of the hands of your potential buyers, but it still helps them to learn why they lost. They might make stronger offers on their next house as a result.

What to Do After Accepting an Offer

The home sale process is just the beginning once you accept an offer. Both buyers and sellers have work to do to meet each of the requirements in the sales contract. Unless you accept a cash offer, your buyer will need to work through the mortgage application process.

They will also schedule a home inspection. As the seller, you will meet any of the agreed-upon contingencies and start packing. 

Here are a few things to keep in mind after you accept the best offer for your home.

Finalize the Contract

After you accept the best and highest bid, the winning buyer will submit an earnest money deposit to prove they are serious about the home. They will proceed with inspections and appraisals to confirm the property is in good condition. This is where a few problems can occur.

If your house has significant issues that you did not know about, your buyer may renegotiate the price based on the repairs they need to make. If there is an appraisal gap, meaning the appraised value is lower than the offer, they might also try to renegotiate. 

As the seller, you can work through these negotiations to retain the buyer or you can seek other buyers who might be willing to overlook the repair needs and appraisal issues. Keep in mind the buyers you rejected earlier might have already moved on to other homes.

Also, if you were unaware of issues before the first buyer’s inspection but know about them now, you will need to disclose details of the issues to other potential buyers before they bid.

Prepare for Potential Backup Offers

One way to protect yourself as a seller is to accept backup offers if the deal falls through. Simply put, if your current buyer walks away from the deal, you contact the backup buyer and let them know their bid has been accepted. If you receive multiple offers on your home, you can let the rejected buyers know that their bids can be saved as backup offers if they want.

Your Realtor can also continue marketing your home when it is under contract as long as they are clear that they are looking for backup offers.

The main benefit of a backup offer is that you don’t have to remarket your home and delay the sale process if your buyer backs out. However, there are drawbacks to keeping backup offers saved. First, your backup buyers could move on by the time your current buyer backs out. They could rescind their offer when you need it most.

Next, your other buyers could back out if they face the same issues as your current one. For example, if your house has significant foundation issues, multiple buyers might be scared away.

Determine whether the reason the deal fell through was because of your buyer – maybe they couldn’t get financing or fell in love with another house – or because of you or your house. You may need to make repairs or adjust your expectations for the sale when you move on to your backup buyer.

Hire a Real Estate Agent Who Can Handle Multiple Competing Offers

Many sellers dream of having to deal with multiple offers and want to hire a listing agent who can bring in the most money for the home sale. However, reviewing bids takes time and careful consideration. The highest bidder might seem like the obvious choice, but it isn’t always the best one. 

To learn more about real estate contracts and the bidding process, hire an agent you can trust. FastExpert has an extensive database of real estate agents who are eager to work with you. You can find a Realtor who has a proven track record and is a good personality fit.

Try FastExpert today and find a Realtor who can help you with a multiple-offer sale.