Reviewing Multiple Offers: Never Assume Anything.......
I read quite a bit of material on the strategy of presenting offers in a multiple offer situation. Yes, that is a science in itself depending on all the variables that exist in that particular potential sale situation.
But from a listing agent's standpoint who has seen a ca-zillion offers cross my desk, is it really as simple as giving cash the heaviest weight?
Not necessarily so in all cases. Let's analyze.
What are some of the typical scenarios in a multiple offer situation? For the sake of analyzing, let's use a scenario in which there are many offers. Let's say 12 offers in this case.
Do you automatically start separating the stacks based on which offers are cash going to the top? And large down payments next in line?
Let's put the breaks on that process for a second. Why? Well most importantly, when you are looking at the concept of net proceeds, it is based on the underlying principle of proceeds you are left with at CLOSING. And I want to emphasize the word CLOSING, because no proceeds transpire at all unless the transaction is CLOSED.
And as many of us real estate professionals can testify, closing a transaction isn't always a walk in the park...........with ice cream............on a perfect day............with rainbows.............and butterflies.
Let's start with cash offers. Many times the closing period is faster due to there being no lender requirements or process to go through. Sounds great, right? Hold on a second. Let's talk about the concept of PROFILES.
An often very overlooked concept is the PROFILE of the buyer on the sale of a home. Profile is a HUGE factor when considering an offer. Why? Because depending on the profile of that buyer, it really doesn't matter what numbers they are presenting if their profile starts to "smell" like the transaction may crash and burn!
NOTE: This is the part where you pull out the (gluten-free) Danish and coffee, and we "tawkst amongst ourselves"
Let's start with the cash offers. How often do you find that cash buyers have an "attitude"? Meaning, they automatically assume because they are all cash that everyone around them has to bend over and grab their ankles in order to have the life-long "dream" of working with them? Self-entitlement can be a very wicked, wicked monkey. Many times it will rear its ugly head during a transaction, sometimes in the form of attempting to re-negotiate the contract under the assumption that their cash will allow them to manipulate the situation.
I've seen on many on occasion where a cash offer is accepted, and then later on in the transaction they submit a request for credit towards repairs that basically reads "I want this house for free". Or perhaps they attempt to put the seller under the time-constraint gun in requiring something unreasonable in order to make that quick closing still happen. Oh, hell, I've even seen where the cash offer was nothing but one big ruse because they buyer then attempted to get a loan after entering into the contract as all cash.
The point I'm trying to make here is: Never assume anything. Ask questions. Profile not only the buyer, but the buyer's agent also. Do you have a history with this agent? Are they typically a straight shooter or do they have a history of being slippery? Does all of the buyer's paperwork with their cash offer seem consistent? Is their "cash" truly liquid, or is it sitting in an investment account that is going to take 60 days to liquidate?
And what is the "tone" of the buyer's agent? Do they seem friendly and cooperative? Do they convey that their buyer is truly appreciative of the potential of being selected as the buyer in a multiple offer situation, or does it seem like they have self-entitlement issues due to their boatload of cash?
All of these things have the potential of coming out during the escrow if that buyer and/or their agent don't want the property JUST AS MUCH as someone with a low down payment.
Which brings us to the next subject: DESIRE.
The desire from a buyer for that property and how that desire and conviction transpires all the way to the end is CRITICAL.
There are almost ALWAYS a few bumps during an escrow, but it is the level of desire and conviction of both buyer and seller that will bring the transaction to a close. There is a phrase I use all the time that illustrates this: "As long as you have a buyer that wants to buy, and a seller that wants to sell, everything else is just details"
Remember that buyer that you left at the bottom of the stack with only 5% down? In a competitive market, don't you think they would give their left arm AND perhaps their next unborn child to get that property? And that desire will certainly transpire during the transaction to the point where what may seem like "drama" or an impetuous nuisance to a cash buyer will likely seem like nothing to that low down payment buyer because they know if they don't get through the transaction and have to hop back on that house-hunting horse, they may not get this opportunity again. THAT level of conviction will many times get this property CLOSED.
And as most of us know, a canceled transaction means one more month of mortgage for the seller, plus one more month of maintenance, taxes and insurance. PLUS, many times if the listing shows as "back on the market", it will immediately cause a question to all other potential buyers as "what is wrong with the property?" and/or "why did it fall out?" That apprehension many times ends up in a price reduction in order to get the property sold.
Not feeling so great about that cash buyer canceling and poo-poo-ing all over your parade now, right?
Does the offer from any buyer need to be the highest and best? Of course. But encourage dialogue with those buyer's agents during the multiple offer, counter offer and negotiation process. Let that period serve as the litmus test as to the level of conviction they have to get your listing CLOSED.
Many times, the weight of that desire may surpass the weight of that wheelbarrow of cash.