Why Are There Multiple Offers?

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Today’s real estate market continues to provide agents and their clients with new challenges. One hurdle that we’re facing is the prevalence of multiple offers on well priced properties.

If what we have been seeing and hearing on the news about our real estate market is true, why would this be happening?

Statistics show that the Atlanta area listing inventory is quite low compared to the previous 4 years. In the under $100,000 range citywide, we are seeing a 3 month inventory at best. The total number of days on market for all properties has dropped to a citywide average of 13 days during the month of April 2012. The average sales price on the other hand continues to creep upward.

With low inventory, it takes less time for a listing agent to get an acceptable offer for their seller. With multiple offers added to the mix, it makes sense that sales prices are on the rise as bidders are often offering more than list price to secure the property they desire.

Highest and Best Offer

So why are we seeing so many situations in which home buyers are asked to provide their “highest and best” offer as a result of multiple offers being made on the property? Like any seller, the banks found that the only way they were going to get offers from serious buyers is if they price the property at or below market value. When these well priced properties hit the market, there is a rush to view them.

Some sellers, like HUD and Fannie Mae, limit the availability of these homes to owner occupants only during the initial days of the listing. If the seller receives an acceptable offer during this initial offering, investors are never able to bid on it. This creates pent up demand.

So, as other properties hit the market, there is a surge of interest and offers that come in ranging from very low offers to offers well over the list price. The seller, in an effort to be fair to all comers, notifies all of the buyers that there are multiple offers on the property, thus giving all buyers a chance to put their best foot forward.

As a result, when a listing agent lets a selling agent or buyer know that there are multiple offers on the property and calls for  “highest and best,”  it’s in an effort to give everyone another chance to get the seller’s attention. While some people may feel that it’s in an effort to make everyone increase their offer, that is simply not the case.

Actually, having so many properties entertaining multiple offers bodes well for our market, as prices will increase as a result. Buyers may not want to see an end to our very low real estate values, but sellers should see it as a hopeful sign that values are rebounding.

Weigh in….how many offers are you seeing on your listing or how many have you had to make to win the house?

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5 Responses to “Why Are There Multiple Offers?”

  1. Steve Adkins Says:

    My first buyer clients this year we had an offer submitted within 3 hrs of it going on the market and accepted by noon the next day. But my other buyers have each submitted offers more then 6 times each on different properties, all have been out bid. Some of our bids were $5,000 over list price and still lost it.

    For one of my buyers, today we got “Lucky #7” accepted after looking at more then 90 properties. This was the second listing in 12 months I have dealt with that did not have multiple offers. The first was is in the above paragraph.

  2. pviohl Says:

    I am coming up against “highest and best” situations more often than not, and buyers can become frustrated with that process, particularly if they find themselves always on the losing end of things. I have a question though – if the comps bear out a price close to the initial asking price or lower, but your buyer really likes the house and wants to go in higher, do you just do so, and trust that the appraisal process will take care of bringing the sales price back down in line? I want to take good care of my buyer, but does that mean telling him/her that going well above the comps is not a good idea, or does that mean I make the offer my buyer wants to make and trust the appraisal system? Example: list price $79,900; I found very good comps within the same subdivision [same SF, same feaures, same condition] and the SOLD prices ranged from $60K up to $76K, averaging $70K. We offered list price; now are in a highest and best situation. What is the best thing I can do for my buyer…..

  3. Brandi Callum Says:

    It’s annoying, a lot of work and I have submitted at least 50 to no avail. I’ll be glad when they all go away. Some clients get frustrated and walk away thinking we – the realtors are trying to “jack them up” for more money. If you don’t prepare your clients to expect this, they won’t understand why they have to bid again.

  4. virginia westlake Says:

    One of the agents in our office has written 17 contracts and not one was accepted. He is very frustrated to say the least!

  5. Kerry Sherwood Says:

    Very frustrating. Even explaining that the odds are greater that there will be multiple offers with a highest and best situation, some buyers just will not bid list or higher. I’ve also had buyers tell me that they still believe the sellers are marking up their list price for negotiating.

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