Four Questions to Ask, or, “Context, Context, Context”

With multiple offers making a comeback — especially bank foreclosures that are “priced to sell” (and then some) — it once again bears asking: ‘how do you know if the property you’re interested in is really in multiple offers?’

Herewith are the four ways to tell.

One. When it comes to multiple offers, it’s not “location, location, location” — it’s “context, context, context.”

The only way Realtors — or appraisers, for that matter — have to determine value is by looking at similar, recent sales. Called “comp’s” (“comparable sold properties”), they typically are the 3 most recently closed sales of similar properties.

So if you’re contemplating buying a 1928 Tudor (3 BR’s/2BA; 2,100 FSF) in Minneapolis’ Longfellow neighborhood that’s asking $249.9k, and the last three sales have been $270k, $300k, and $304k . . . it’s certainly plausible.

To know for sure, though, you’d have to have some firsthand knowledge of the other Tudor’s.

Did they have the same FSF, bedrooms, baths, etc?

Were they updated?

What were the floor plans?

Were the mechanical’s, roof, appliances, etc. all new — or a mess?

Once you’re armed with that information, the likely selling range for any given home usually becomes apparent.

Two. Usually, but not always, multiple offers materialize early in a listing.

For the same reason you don’t see too many $100 bills lying around, you don’t see too many $125k homes linger on the market at $85k — even in a Buyer’s market with lots of inventory and tighter credit.

So if the home in question has been on the market 3 days, and the listing agent says that there are multiple offers . . . you’d certainly find that a lot more credible than if the corresponding market time was 203 days.

The one exception to that is a home that has suffered serial price reductions over a very protracted listing period, to the point where it is now arguably undervalued (again, based on the comp’s).

It’s not unheard of for multiple buyers to simultaneously reach that conclusion, and enter into a mini-bidding war causing a “bounce” in the home’s selling price.

Three. Who’s the agent?

If it’s a reputable agent, and they say that there are multiple offers . . . there are. Period. End of story.

Depending on my Seller’s schedule and wishes, I’ll frequently tell prospective Bidders in a multiple offer situation that “all offers will be presented at my office at 2 p.m. Thursday.” If they want to know if there are other bidders or not, all they have to do is show up at my office.

Even when the offers are not presented in person, listing agents lie about multiple offers at their peril.

While listing agents typically cannot divulge anything about competing offers, simply how they field questions can be instructive. When there is another offer, the rebuff’s tend to be quick and straightforward; when it’s a bluff, there’s more hesitation and fumbling.

Too, good listing agents know that Buyer’s agents will know the comp’s. If the home in question is tens of thousands more than the comp’s, it’s simply not credible that there would be multiple offers. An agent who says otherwise has no credibility — on this deal, or future ones.

Four. Wait.

Even if there are multiple offers, it doesn’t necessarily mean that any of them are strong offers.

And it’s certainly possible that an agent marketing a unique, hard-to-price home might succumb to temptation, and (convincingly) fabricate the existence of another offer.

So how can you know for sure?

If you wait a week and the home is “Pending,” they were telling the truth.

If they were lying, you’ll know because the listing agent will call your agent to see if you’re “still interested,” and dangle a big price concession.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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