Categories: Hoboken Condos
I’ve truly never seen anything like this market. In the past few weeks, I’m told from very reliable sources (i.e., the listing or selling agent) that not one, but two properties went for more than $100,000 over asking! Fine, one was underpriced by an out-of-town agent who clearly didn’t know how to price in the Hoboken market. But it certainly was not underpriced by that much. I’m seeing properties regularly going for about 10% over asking. It’s often a very fast and furious process and both buyers and sellers(not to mention newer, inexperienced agents) are often confused by how it works and why.
Multiple Bids – what happens?
In New Jersey, we have something called “Attorney Review”. This is a statutory period during which time the contract is not, and cannot become binding. It is a minimum of 3 business days longs. Herein lies the start of the problem.
When a seller receives an offer, it is up to the seller whether and when to accept it. The seller can say yes, provide a counter-offer and negotiate with the buyer, or say “no thanks” and keep showing the property. Even if the seller accepts the offer, as long as he or she is still in the attorney review period, there is no binding contract. If another buyer comes along with bags full of money, above and beyond what the seller already accepted, the seller can walk away from buyer 1 and accept the offer from buyer 2. In fact, the seller’s agent is obligated under the NAR Code of Ethics to present all offers! Even during attorney review.
Final and Best
I’m sure you’ve all heard that term, or sometimes it is called Highest and Best. Same thing. This is a process whereby the listing (seller’s) agent reaches out to every agent who has shown the property. The email that goes out looks like this:
Dear Agents,We have received multiple offers for 123 Main Street and the seller has decided to ask for your highest and best offer due Monday, at 1:00pm sharp. Please include the following information in your email:
Purchase Price:Total down payment (amount/%):Deposit paid after attorney review:Earliest possible closing date (or range of dates acceptable to the buyer):Does the buyer plan on owner occupying the property:Specific inspection terms (does buyer waive all or part of the inspection request for repairs?):Specific appraisal terms (does buyer waive all or part of the appraisal?):Specific mortgage terms, if any:Do the buyers need to sell a property in order to buy this property?What attorney will be representing buyer:
Escalation clauses will not be considered.
Any waivers, full or partial, for inspections, repair credits, mortgage contingency and/or appraisals must be fully spelled out in the offer. Appraisal waivers should be included in the contract acknowledging that the buyer has the additional funds to cover 100% of any appraisal shortfall.
Buyer’s attorney’s contact information shall be provided with the offer to commence attorney review immediately upon selection. We very much appreciate your interest in the home. Thank you for showing. Have a great night!!!Sincerely,Seller’s Agent
The offers are gathered, summarized and present to the sellers by the listing agent. Seller then decides which one to accept. Others are held for “back up”.
Here’s the rub – sometimes a buyer will make a really high offer and in exchange, ask the seller to take the property off the market. To stop all showings. To cancel the upcoming open house. The fact is, if other agents have already shown the property, more offers can, and often do, still come in. Sometimes the buyer asks that all other offers be only for “back up” purposes. The bottom line is that as long as the attorney review minimum 3 business days have not transpired, the seller can always change his or her mind and change buyers. Sellers have many options when they receive an offer and it should be their decision as to how they wish to handle it. They can:
-tell the buyer they just put the property on the market and want to show it through the weekend before making any decisions;
– accept the offer and keep showing the property in hopes of getting something better;
– accept the offer and agree to show the property for “back up” only;
– accept the offer and agree to stop showings entirely;
-accept the offer and, if another offer comes in, tell the first buyer about the second offer and negotiate from there;
-call for final and best from all potential buyers.
Buyers often ask me if they will know what the other buyers are bidding. In almost every case, the seller does not wish to disclose this information. But they could. Sometimes, they should! If a seller gets a very high, all cash offer, why not tell other buyers? If they can’t beat it anyway, what is the point of asking for final and best? Most of the time sellers prefer to have a blind bidding process.
The wrinkle is that even after holding final and best and telling a buyer that they “won” the bid, other buyers can still increase their offer or better their terms and the seller’s agent is still obligated to present the offer, and seller is still in the attorney review period and can accept the increased offer from the other buyer. This leads to all sorts of hard feelings but it is perfectly legal.
Sellers should give thought to how they might handle offers before they put their property on the market. My recent experience has been that most listings sell within the week of being listed. Sellers need to be prepared for these eventualities. Hopefully, they have engaged an experienced agent who has handled all these permutations and can explain the pros and cons of the various courses of action. Experience matters now more than ever before!
As for buyers, there are strategies for making an offer that is more likely to be accepted and to bidding in a multiple bid situation that gives you the best chance of being chosen. Feel free to contact me if you’d like to learn more.