Listing or finding a house is just the beginning. A successful sale depends on effective negotiations.
Whether you are buying or selling, the negotiation process can be a little intimidating. Navigating multiple offers can be especially confusing, so we have compiled some common questions to help you prepare for your own purchase or sale.
How long will negotiations take?
The time period for negotiations can, itself, often be negotiated. The seller has a lot of authority to direct how offers are handled, and how long they take to wrap up.
When a seller lists their home, they usually sign a direction form that indicates how they would like to be informed of offers. They may choose to accept all offers any time, or set a date on which to view all offers received. They can decide that they would like to have a period of time to consider offers before making a decision, or they may just work with the time frame that a buyer offers.
These days, it’s most common to see some sort of delay to give sellers a chance to accumulate and compare multiple offers. MLS listings indicate the day and time when sellers will sit and select an offer (if there are multiples) to work with. An alternative to this is to request a longer “irrevocable” period. Since almost every offer comes with an expiry date and time – a “drop dead” date – some sellers request that they be allowed 24, 48, or even 72 hours to respond.
Having said all that, actual negotiations can be completed the same day offers are considered. This is quite typical during a bidding war. If there are points of discussion or concessions to make, the parties may continue the conversation into the next day. Rarely does a negotiation on a residential property continue much longer.
For Buyers: If the seller accepts my first offer, does that mean I offered too much?
Buyers are understandably afraid to overpay for a house. Many buyers, when first dipping their toes into a strong sellers’ market, are extremely cautious. They find themselves being outbid over and over, and they get discouraged.
It is extremely important that buyers learn to “tune out the noise,” even as they put their best foot forward on offer day. Never offer more than you can afford, no matter how much you like the house or how many offers there are. It may not be reasonable to refuse to compete for a house in this market, but that doesn’t mean you have to throw caution to the wind.
Before making an offer, do lots of research with your agent into recent sales of comparable homes. Be comfortable with the amount you’re willing to offer, and if the seller accepts your offer, celebrate, don’t second-guess.
Will I get a chance to improve my offer?
Maybe, maybe not. Not all listing agents operate the same way and you may not get a chance to improve your offer if they are choosing the “highest and best” right away. Your level of motivation will determine whether you roll the dice on this one. How will you feel if you miss out on this house because someone was willing to start at a price you would have paid? If you can shrug that off and happily keep looking, it may be worth the gamble.
If, however, you really would like to have your offer accepted over all others, it may be wise to put your best offer on the table right away.
For Sellers: Do I have to accept the highest offer?
No. You do not have to accept the highest offer, or any offer. As the seller, you have the last word about which offer, if any, you will accept. You may:
- Accept an offer (at which point you decline all the others)
- Sign back, or counter, an offer (but just one)
- Reject all offers.
Price is only one factor, albeit usually the most important one. Conditions, closing date, and terms are also considerations when you are at the table.
Remember that (notwithstanding the advice above) some buyers cannot bring themselves to put their best offer forward at the outset. It is usually worth having your agent call the buyers’ agents who have come in short to see if any of them would like a chance to increase their offer or remove conditions. Surprisingly, sometimes, a buyer who came in low at first steps up partway through the presentation process with a really stellar offer!
Should I counter an offer?
If you have only one offer, and you would like to counter in writing, do that. Remember, though, that you are putting the shoe on the other foot – you are now making an offer to the buyers. You must give them an irrevocable date and time when your counter offer will expire. By putting the ball in their court, you give up the power to accept their previous offer. The buyer must now decide whether to accept your counter-offer, reject it, or counter it. They are free to walk away if they choose.
In multiple offer situations, be careful about replying in writing to one offer. It may be better to have a voice conversation and ask that a buyer to resubmit their offer with your desired changes.