Amy Wallick

Multiple-offer situations continue to proliferate in the Massachusetts housing market, despite a slight decrease in monthly median sales prices over the summer (down 9.77 percent between June and September for single-family homes and 9.65 percent for condominiums). This is largely due to the continued low inventory of available housing keeping market competition high.

So, if you’re an agent, what counsel can you offer buyers and sellers on the opportunities to embrace – and pitfalls to avoid– when dealing with multiple offer scenarios?

It all starts with being well-prepared and well-informed.

Multiple Opportunities and Potential Challenges

Multiple-offer scenarios occur when there are more buyers than sellers, and “bidding wars” may escalate when two or more parties compete to purchase a home. Each buyer presents an attractive offer, and the next prospective buyer responds with an even higher price point – often driving the home’s price beyond the original listing price. While these situations present opportunities for both buyers and sellers, multiple offer scenarios can also result in misunderstandings, complaints and even potential legal implications.

Being prepared means making sure your clients understand the implications of multiple offers and are setting clear expectations for what their goals are, including price, turnaround time and communications.

Buyers should put themselves in a position to be the most attractive bidder by getting pre-approved for a mortgage, and setting a budget and sticking with it – they should know their maximum offer capacity.

Buyers should also move quickly to offer a competitive price, potentially above the asking price, and understand how contingencies, such as home sales and financing, can affect an offer.

Above all, buyers should try and not get too emotionally attached to a given property and be prepared to walk away if the bidding war escalates beyond their maximum price point.

While sellers may think they are in the driver’s seat in multiple offer situations, things can quickly spiral out of control, discouraging buyers and potentially making them break off negotiations to pursue other properties. Here are a few seller “dos and don’ts.”

Do consider all strategies, including best offers, counter-offers or considering all offers on the table; set clear deadlines for reviewing offers; and understand how other terms and contingencies in an offer may affect its desirability.

But don’t accept a buyer based on a “love letter.” Love letters are any type of personal appeal, such a letter, video or any form of communication. These communications may inadvertently reveal personal information with potentially discriminatory implications, e.g. religion, disability status, etc.

And don’t decide based on a “feeling.” Instead, make sure a buyer is fully vetted, including pre-approval letters from a reputable financial institution, a positive debt-to-income ratio and whether they are flexible on a closing date.

Keep Emotions Out of the Negotiations

There’s a reason multiple offer situations are referred to as “bidding wars,” with emotions running high on both sides. According to a recent article in U.S. News and World Report, buyers who enter a bidding war may have already lost out on another property, so the stake and emotions are high for them. In tight markets, properties move quickly, and buyers and sellers must be prepared for the stress of a fast-moving transaction. Being emotionally prepared means making rational decisions rather than impulsive ones.

For all parties, maintaining respectful and clear communications is critical. While listing agents represent the seller and buyer-representatives the prospective buyer, Realtors should be honest with all parties. They should provide counter offers quickly and cooperate with other brokers. Both buyers and sellers should be in regular communication with their respective representatives to stay ahead in today’s fast paced real estate environment.

They should also have a backup plan. Buyers can always walk away instead of making a higher offer, particularly if the offer exceeds their maximum price point. Sellers can entertain multiple counter-offers, or even go with a lower offer if the second-highest bidder is less reliant on financing, is more flexible with closing dates or is willing to submit a higher deposit with their offer.

And remind your clients that multiple offer situations will result in only one sale. Ultimately, it all comes down to the following dynamics: Sellers want the highest price and best terms for their property. Buyers want the lowest price at the most favorable terms. Only one offer will be accepted, but if all parties come to the table knowledgeable and prepared, the chances of misunderstandings and disappointments will be reduced.

I am often asked if these bidding wars will slow down. I am hopeful that with the recent decline in the median sales price, more sellers will be able to enter the market. This also may help increase the number of prospective homes on the market. For the latest on market conditions and multiple offer strategies, consumers should be sure to consult with their real estate professional or visit our website, MARealtor.com.

(tag) Amy Wallick is the 2024 president of the Massachusetts Association of Realtors and a Realtor with Lamacchia Realty in Beverly.