By Dan Polimino
If you have been around the real estate market the last few years you have heard a lot about homes getting multiple offers, or the prospects thereof. In fact, if you have the right house, in the right location, with the right finishes and the right layout, even in a slower market you can still get multiple offers. For instance, if anything comes up for sale in Hualālai Resort, where the Four Seasons hotel is located, it is generally sold within a day, and it will have had multiple offers. If a beautiful house comes up for sale oceanfront in Puako, generally that house is sold within a day with multiple offers. Again, this is still happening in what some people think is a depressed market; but not for parts of Hawai`i. This may be music to your ears if you are selling your home. You may be thinking all you need to do is to stick a sign in the yard and you’ll have multiple offers. In addition, you may think you don’t need a realtor to do any of this since it sounds so easy. The last part is where you have gone off the rails.
You see, the multiple offer scenario is one of the toughest deals to handle in real estate. First, the real estate commission mandates that you treat all consumers fairly and that you create a level playing field. For instance, if you advertised showings to start on a specific day and then let someone in to see your home before that day, that would be a no, no. Or, leading people to believe they had until Monday at noon to submit an offer and then not abiding by that time frame would also be a no, no! Whatever rules you apply to take advantage of the multiple offer scenario should be even and equal to all parties.
Many times, when I am representing a seller and we are looking at a multiple offer scenario I ask the seller, “how will you select the winning offer?” They say, “that’s easy…. the highest price.” Wrong answer. The correct answer is, “the buyer most likely to close;” that should be the winning bid. Many people will send in a high offer with no intention of closing (particularly real estate investment trusts), Why? Because they are trying to tie up your home until they can decide if they want to buy it. I know, it sounds crazy. In the meantime, your home is off the market for a week or two and then they terminate the contract. You then try to go back to all the other offers, only to find that those buyers have all found another home to buy. You end up putting your home back on the market and waiting for the next buyer, and this time it’s most likely not at full price or over asking price.
Selecting the buyer who is most likely to close is all about selecting the offer with the best terms and the best price (you’ll notice I did not say the highest price). The best terms are things like cash offers, (make sure they are real cash offers by verifying their proof of funds not just from a letter) waiving appraisals, allowing earnest money to become nonrefundable at contract, allowing post occupancy after the sale, waiving inspections, and other terms favorable to you the seller. Then, if you have a good agent representing you, he or she should be able to work one offer against the others, so you end up with the best price and best terms. This is all a very tricky dance because the conversation between all the agents starts off just as a verbal negotiation, but then needs to turn into a written negotiation. This all must happen within a specified timeline, while not scaring off one or more buyers. You need to keep all the buyers in the game while the negotiations are going on, both verbal and written. Then, if you’re selling the house to someone who’s getting a loan, you’ve got to make sure you’ve written appraisal gap language into the contract. This would cover the seller in the event the house did not appraise at the purchase price and would force the hand of the buyer to continue forward with the contract to closing. Remember, if you have not chosen your buyer wisely, you’ll end up with a terminated contract, no buyers and starting all over.
Your home, for most people, is the most expensive asset you own, why mess around? Hire a professional who can navigate the tricky multiple offer scenario and get you the highest price in the shortest amount of time.
Dan Polimino is the owner of the Hawai`i Team in Kailua-Kona, Hawai`i. He and his team are the luxury residential experts for the Big Island. If you are thinking about buying or selling in Hawai`i, then please reach out to us at team@thehawaiiteam.com or call 808-913-0899.
