Faulkner: The emotional impact of multiple offers

The highest bid may not offer the best conditions — consider the whole package.

Article content

It has been two years since multiple offers were commonplace in the Edmonton region. In the first quarter of 2022, we experienced a very strong seller’s market where multiple offers were commonplace.

In January of this year, the market shifted back into a strong seller’s market. The overall market is not quite as strong as the first quarter of 2022 for single-family homes, but it is close.

Advertisement 2

Article content

Article content

This year, however, I don’t feel that our market will slow down like it did in 2022. We will likely see a strong market for the next two to three years with multiple offers and continued price increases.

Since multiple offers are commonplace again, it’s good to understand a little of the carnage that they can leave behind. Generally speaking, we have found that multiple offers are very stressful for the buyers competing for a home. They don’t want to pay too much and they don’t want to lose the bid. Often balancing the two seems impossible.

In the Edmonton region, most multiple offer scenarios are a blind bid. That is, no other buyer will know what the competing offers are.

Not knowing what the competitive bids are is stressful for a buyer (and their realtor). Losing the bid on a home they love creates a sense of loss and disappointment and it also means the buyer has to keep looking and there is always uncertainty whether they will find one they like as much.

In a balanced market, realtors can pull up comparable sold listings and evaluate the price based on past sales. In a strong sellers’ market, that data, even just a couple of months old, can be irrelevant.

Article content

Advertisement 3

Article content

In a balanced market, we typically aim for a “win-win feeling” for both the buyer and seller. The seller will often price their home expecting it will sell for a bit lower than they are asking. The seller may feel like they are getting a good price for their home and the buyers may feel like they got good value through the negotiations. Both parties may feel like they won.

In a multiple offer scenario that is often not the case, and the buyers’ stress and anxiety are real and palpable.

The first stressor in today’s market can be as simple as finding a home you like before it’s already pending or sold.

Once you do, the next stressor is deciding on an offer price. Your realtor can help you navigate the offer price decision by reviewing the active competition, the most recent sale prices, the current absorption rate (market strength), and knowing how many offers are in play. Generally speaking, the more offers there are, the higher the offers will be.

The buyers who will write the highest offers for your home will often be the buyers who have already lost out on two or more offers.

Once the offer is in, the buyer will wait for a response, which they hope is a simple acceptance. In a strong sellers’ market, some listing realtors and/or sellers may try to play the offers against each other.

Advertisement 4

Article content

The highest bid may not have the best terms so the seller may go back and counter an offer that has great terms but not the highest bid price.

Sometimes a seller will counter the highest bid whether their terms are good or not. A seller may feel that they can get more and counter the highest bid with an even higher price. If the buyer accepts, the buyer might feel like they got held over a barrel and paid too much.

These strategies can work to get the best price/terms for the seller, but sometimes they can backfire as the buyer may feel pressured after accepting the countered back offer and then regret paying that higher price and eventually walk away from the deal.

Winning the bid can provide momentary excitement and celebration for buyers. However, those feelings of excitement eventually fade somewhat, and a well-known and common phenomenon that we call buyers’ remorse can occur.

If a buyer begins to think that they may have overpaid, they could regret their purchase decision. After the inspection, they will likely find things that need maintenance and repair as no home is ever perfect.

Advertisement 5

Article content

Should the buyer decide not to proceed with their offer and purchase decision, the seller must find another buyer. With the home no longer being a brand new listing, it may not garner as many offers on the second round and therefore not as high an offer.

It is exciting for sellers when they receive several offers on their home, however, the offers are only good if they are completed. Knowing how high a seller can push the selling price is the tricky part.

Relying on your trusted realtor for sound advice can help you successfully navigate the multiple offer process — a completed sale at full market value.

Dennis Faulkner, BA Economics, works as a realtor at MaxWell Challenge Realty. He can be contacted to answer your real estate questions at [email protected]

Article content