Multiple Strategies for Multiple Offers
The way competing offers are handled has evolved through the years. Back when I started out in the business in the early Nineties, you didn’t see a lot of multiple offer situations, and when you did, you would generally vet the different offers and the parties making them
and decide which one to respond to.
As things heated up in the late Nineties we started to see “sliding offers”, where the term would be written in that the Buyer would increase their offer to beat the highest competing bid by a certain dollar amount, subject to confirmation by being shown an unmodified
copy of the other buyer’s contract.
While initially touted as a revolutionary practice, it posed several technical challenges, including objections by many agents (and eventually the California Association of Realtors) around fair practices and preserving the confidentiality of competing bids—and as the
practice spread in popularity, it also became commonplace to see competing parties offering the same sliding terms, which nullified the core concept of the strategy in the first place by creating a logic loop.
To provide a more manageable alternative, the CAR introduced the provision a few years later (first in an addendum, and ultimately in the Multiple Counter Offer form) to give sellers the option of countering back to multiple buyers while reserving the final right to select the
winning bid in the event that more than one buyer accepted—or exceeded—their offered terms.
Over time, the way listing and selling agents use these forms went through several evolutionary steps as well. When the form first came out, it was common practice to issue a counter to every buyer who had presented a viable offer. The intent was to raise the bar for the maximum number of parties to give them a chance to step up, or come back with an even higher offer in the interest of standing out from the crowd, and it wasn’t uncommon to see a second round of competitive bidding ensue.
As the market heated up during the Dot Boom, the sheer numbers of offers coming in made it more common for the sellers and their agents to select the 2 or 3 strongest ones and issue just a few Multiple Counter Offers, which helped lower the workload by focusing on the
most likely candidates.
We also saw an increase in the use of the “Love Letter”, where buyers would share their stories, often accompanied by family photos. This practice was subsequently panned by the CAR, based on the dynamic it creates for possible wrongful discrimination, although many buyers and agents still submit toned-down letters focusing on the experience and financial profile of the buyers, and the strengths of their offer. And every serious offer is accompanied by verification of funds and if there’s a loan a pre-approval letter.
In the current competitive environment, the standards of practice for responding to multiple buyers have evolved yet again, with an increased focus on providing a complete disclosure packet including a full set of reports and inspections for competing buyers to sign off on, with non-contingency offers are becoming commonplace. More often than not, buyers are encouraged to come forward with their highest and best offer out to the gates with most sellers now selecting one offer as the winning bid instead of issuing Multiple Counter Offers. In an ironic twist, this has brought things full circle in the sense that the basic Counter Offer form has become the common standard once again, although there are certainly situations
where the Multiple Counter Offer still poses the best option.
The CAR’s policies around offer confidentiality have also changed in recent years, giving listing agents the option of being able to disclose to prospective buyers what price the highest bids are coming in at, which effectively helps cull the numbers down from literally scores of offers to a more manageable single-digit number of serious competing bids, which can commonly run several hundred thousand dollars above list price.
It all makes for high drama in the midst of one of the hottest markets on record, and now more than ever a multiple offer situation tests the skills and connections of the top agents in the area as they view to gain the advantage for their clients to prevail as the winners in an
increasingly high stakes game.