Identifying “Runners-Up” Buyers
If you’ve been reading real estate blogs lately — this one and others — no doubt you’ve seen more discussion of multiple offers.
That’s because, in a market with much lower inventory, we Realtors are seeing a lot more of them these days.
In that vein, this post is about the pros and cons of disclosing that a given property is in multiples. (As discussed previously, Edina Realty’s default policy is to disclose the existence of multiple offers unless the Seller gives written instructions to the contrary. See, “Real Estate Disclosure for Advanced Beginners.”)
Pros: The chief reason to disclose multiple offers is that the more Buyers who are competing for a given property, the higher the price (usually, at least).
Cons: The main reason not to disclose multiple offers is that at least some Buyers don’t want to get into a bidding war, and will drop out.
If you’re a Seller, which way do these arguments cut?
I’m with Edina Realty: in general, it’s in Sellers’ interests to disclose that there are multiple offers (never mind that graphic above).
Yes, some Buyers will drop out when they hear that, but my presumption is that such Buyers were the least motivated and most price-conscious, and would have paid the least for the home.
So losing them isn’t the end of the world.
Other Considerations; “Runners-up Buyers”
There are three other factors that I think go into the decision to publicize multiples or keep quiet:
One. How unique is the property?
If the home is one-of-kind that’s been off the market for decades, Buyers are less likely to drop out.
Conversely, if there are many close substitutes, the risk is greater.
Two. Recent market activity.
One of the best scenarios for a Seller contemplating multiples is that another, nearby home just sold in multiples.
Lots of “runners-up” Buyers typically means strong competition for the next home.
Three. Individual Buyer Motivation.
It’s a given that Buyers only contemplate making offers on homes they like.
But how much do they like it?
How long have they been looking?
How broad or narrow are their search criteria, i.e., price range, geographic area, preferred home style, etc.?
Savvy Buyers know not to telegraph any of the above. See, “Mum’s the Word on (Buyer) Motivation.”
However, sometimes relative Buyer motivation slips out, making it easier for the Seller (and their agent) to gauge whether a given Buyer’s threat to sit out multiples is genuine.