1.Make Sure the Owner Understands What May Happen
This discussion needs to happen in advance, before the house is listed. Most owners think multiple offers would be great. That’s true if you handle it right. Since you’re likely representing all Lynchburg realtors (if that is where you’re based), it would be your responsibility to discuss everything from multiple bids to how you will deal with them. Explain the timing. Explain the risks of interested buyers dropping out when they find out they are in a bidding war. Explain the need to be fair to all participants. Set a day and time that the offers need to be submitted and set a time that the participants will be notified of their win or loss.
2. Explain the Meaning of an Escalation Clause
In a recent biding war, where each realtor Greensboro was told to present in writing their buyer’s highest and best offer, one participant wrote, “Should anyone offer more than the number I am submitting, my clients would be willing to raise their bid to $10,000 above the highest offer up to a maximum purchase price of xxxx.” I had explained the escalation clause to my sellers ahead of time. While other buyers submit their highest and best and pre approvals or proof of funds, the buyer with the escalation clause hopes to pay less. Often if the owner excepts this buyer, the response is “I never dreamed it would go that high”, plus the buyer may not be financially capable of buying the house. In this recent bidding war, the owners seeing an offer with an escalation clause, said “No way, I think that’s ethically and morally wrong.”
3. Be the Conduit not the Author of a “Love Letter”
Some real estate companies will not allow their Realtors to present offers to purchase with letters from the Buyers. They fear the letter will place the Realtor at risk of a Fair Housing complaint. Never write a letter for a buyer. If the buyer asks you about including a letter, tell them to write about the features of the house that they love. Tell them not to make it about themselves or include family pictures. In a recent bidding war, the owner chose a buyer who had included a letter saying they loved the details of the house and they hoped to restore the house, not tear it down.
