In a multiple-offer situation, why is the highest offer not always the best?
For our listings, we regularly see multiple-offer situations where buyers compete with each other to the point that they’re making offers above asking price. The problem with this is that in their contract, the buyer has the option to order an appraisal. The contract also states that if the home doesn’t appraise at the written sale price, they have three options:
- Ask the seller to reduce their price to the appraised value.
- Negotiate a price somewhere in between
- Ask to be let out of the contract (if the first two options fail)
My team and I recently listed a property that snagged seven offers. The top two offers were $30,000 and $23,000 above asking price. The buyer behind the second offer, though, negotiated up front with the sellers that they would pay the difference between the written sale price and appraised value if it happened to be less. That was huge, and the buyer behind the first offer didn’t include that kind of contingency in it, which meant if the home didn’t appraise, they’d have a problem on their hands. When we did a comparative market analysis of the area, we discovered that the price that buyer offered didn’t support the comps, so that was likely where their deal would’ve ended up. In this case, the second buyer clearly had the better offer.
As always, if you have questions about this or any real estate topic or would like to know what your home is worth in today’s market, don’t hesitate to reach out to me. I’d love to speak with you.