Navigating Multiple Offers
The competitive nature of the current seller’s market in Ottawa has led to more multiple offer situations than anyone can remember in recent history! It has made the news lately with some homes in key markets receiving offers in the double digits and hundreds of thousands over the asking price. This once somewhat rare occurrence is becoming more frequent and it is important to fully understand the process to ensure that you represent your clients properly.
Multiple Offers for Sellers
Will the property generate multiple offers?
It is important to do your research to determine whether a particular property will generate the interest necessary for multiple offers. Some key communities and certain property types are more popular than others so it is important to compare your listing to the other homes that are presently on the market and the recently sold homes. In the current market, townhomes in suburban communities like Kanata North, Stittsville and parts of Barrhaven are doing far better than condos in most parts of the city and will often generate a lot of interest.
How to price the property
The key to success with multiple offers is pricing the property right. After completing a full CMA, you might want to consider pricing the home on the lower end of the projected range; if you price it too high, you are not likely to receive any offers as buyers won’t feel that they have any wiggle room. As is the case with any listing, it is important to price the home aggressively to generate the most interest.
Seller’s Direction re: Property/Offers Form 244
If you believe that a home will generate multiple offers, it is important to get your sellers to sign an OREA Form 244 – “Seller’s Direction re: Property/Offers”. This form will outline that the seller will not receive offers until a certain day and time, usually 5 to 7 days after the listing is launched. It is important to allow enough time for prospective buyers to view the property and you will ideally also host an open house during this period.
It is required that you keep all parties interested abreast of how many offers you are expecting. This can be challenging with a property that is generating a lot of interest as you may be finding out about offers up until a few minutes before the deadline. Keep track of all showings and agents that have shown interest diligently and set up a plan to communicate with them quickly and regularly as the situation changes.
Preparing Your Sellers
It is important to prepare your sellers for all situations. You will want to explain to them thoroughly the entire process before the listing is launched. The Market is constantly changing so it is also important to discuss with them what happens if it does not generate multiple offers; there is generally no risk in this situation as the home will just continue on the market as a regular listing (just make sure to remove the Seller’s Directive and any notes you may have on Matrix). At least you’ll know you didn’t under price the listing if you receive no offers.
Multiple Offers for Buyers
Making a Successful Offer
There is no magic formula for making an offer on a property that is expecting multiple offers but there are some key components that may help your clients be successful:
- Price – If a home is generating multiple offers, it is likely to sell at or above asking price. The number of offers being received, which the listing agent must notify you of, may be a guide for where to price your offer. It is also important to guide you clients on what fair market value for the home would be and keep in mind if they overpay by too much their financial institution may not finance the entire property if they do not feel it is worth what was paid.
- Conditions – A clean offer without conditions is certainly more appealing to sellers but it does mean that your buyers are taking the risk and it is very important that they understand that. You will want to ensure that they have a strong mortgage pre-approval and if possible, find a way to do a home inspection before the offers are presented in order to ensure your buyers are protected.
- Build an Emotional Connection – Especially in cases where the sellers may have lived in the home for many years, it can be invaluable to let them know a bit about the prospective buyers. Maybe the sellers are older and downsizing after their children have left the nest and their decision could be swayed by hearing that the buyers are a young family looking to make new memories in the home. This approach does work in some cases. You could include this information in a cover letter attached to the offer or in some cases it can be very effective to have the buyers write a personal letter themselves. Building this connection can be invaluable.
It is important to note that if 2 offers on a property are received from buyers represented by the same brokerage that technically this becomes a “Multiple Representation” situation and your buyers must be notified. Make sure to follow up with the listing agent to ensure that you are compliant in this case.
Preparing Your Buyers
This market can be challenging for buyers and even the best laid out plan may not always win. Remind your buyers that there are no guarantees and help them better understand how this process works. If they are not successful, remind them that the search does not end there and continue to work with them to find the property that is right for them. Show them why you are the right agent to get the job done for them!