Multiple Offers on Homes Have Risen. How Should They Be Handled?

The market has been crazy these last few months. I’m going to give some general advice here to real estate agents and sellers about how to handle multiple offer situations. As required, I have to give the legal disclaimer that this is general advice, and if you have a specific legal situation arise, you should speak with both your managing broker and an attorney (and maybe even your local board).

Honestly and communication, first of all, is key. Only one of the multiple offers you receive will end in a sale. What happens when you have multiple offers, you accept one, but end up accepting another one later? Do you want to start out having animosity with the second buyer and their agent? Or worse, have them not want to work with you? Also keep in mind the real estate world is a small one. We all know that we tend to run into the same people throughout our careers.

Your main focus as a real estate agent must be your client, the Seller, and your duties to both the Seller and the other parties involved in the transaction.

Ultimately, in a multiple offer situation, the decision on how to handle it is up to your Seller. It’s your job to guide them, and give them the best advice based on your personal experience and what fits their situation.

Sellers can do one of the following when presented with a multiple offer situation:

1) They can accept the “best” offer and advise all other buyers that their offers are “backup” offers,

2) They can “counter” one offer while putting all other offers aside and wait to resolve the counter offer, or

3) They can “counter” one offer and reject all of the others.

I’ve seen a few escalation clauses lately too. Please use them with care. They can be problematic for a number of reasons.

First, if they are not written clearly or properly, they can be confusing, or situations or issues may arise where it is unclear how the escalation clause would be affected or go into place.

Secondly, it gives a buyer a false sense of security. With an escalation clause, many buyers feel that there is no way that they can lose a property. That is simply not true.

Thirdly, connected to this is a seller who believes that the buyer has now given information on what price they are really willing to pay for the property, and may cause a seller to just demand that they pay whatever the escalated price is. This is unfair to both parties, and may even cause appraisal issues.

Generally speaking, your sellers are better off asking for best and final prices, and not accepting any offers with escalation clauses. The terms of a contract must be final, clear and concise.

If you are a licensed Illinois REALTOR®, you can also call the designated hotline for legal advice M-F from 9a-4p. at 800.952.0578 or email the Legal Hotline Attorney, Anneliese Fierstos at afierstos@IllinoisRealtors.org.