Receiving two offers on a listing at the same time—even on a listing that's been on the market for a long time—is common. It's not unusual for a seller to find themselves in a nice spot where they receive more than one offer (known as multiple offers); but as a buyer, it's a tough spot to find yourself in.
It's an odd phenomenon—a home can sit on the market for months without any offers, but the minute an interested buyer comes along, a handful of other buyers appear. There aren't many incentives for an agent if there are multiple offers; unless they are the selling agent, who then gains a higher chance of selling the house and earning a commission. There isn't much to earn via commission after the bidding war starts (unless bids rise dramatically).
Two offers on a listing can happen for a few reasons; some agents have pocket buyers, new listings can create a frenzy of showings, and a rise in demand can increase multiple offerings.
- Newly listed homes may have multiple offers if it's a desirable home, so you must act quickly and give the seller a strong offer with a tight deadline for response.
- If a home has a second offer from a listing agent's "pocket" buyer, then you may be at a disadvantage, but you could try increasing the amount of your offer.
- Unexpected issues with supply and demand, such as complications from a natural disaster, can also result in a sudden rush of offers on a home.
Two Offers on New Listings
New listings attract a lot of attention within the first several weeks of coming on the market. Interest tends to wane after that period and showings begin to decline.
Most multiple offers happen on newer listings with fewer than 14 days on the market. If the home has curb appeal, is priced right, is in good condition and located in a desirable neighborhood, many buyers will want it. Some tips for making an offer on new listings are to:
- Submit an offer quickly.
- Not give the seller more than 24 hours to respond.
- Allow your agent to accept delivery of the offer.
- Not give the seller a reason to make a counteroffer.
In a multiple-offer scenario, the seller's agent might also ask prospective buyers to each submit a best and final offer.
Remember the mantra— location, location, location. Location is the number one key to selling property.
Two Offers Between Listing and Selling Agents
Sometimes the listing agent has a "pocket" buyer; this is a buyer who has instructed the agent to call when another offer arrives. In this instance, the listing agent might share details of the first offer with this buyer so the buyer can write a better offer than yours. Your agent should ask the listing agent about the offer, as it could make a difference if it one of their buyers.
If the listing agent is representing the buyer of the second offer in a dual agency agreement, three things can happen that would put your offer at a disadvantage.
- Your offer could be less than the second offer. You might want to consider increasing your offer.
- If your offer is not less, the listing agent can increase the seller's net proceeds by reducing the listing agent's portion of the commission. Some multiple listing systems (MLSs) note if the commission is variable in the listing. Ask your agent to check and take that into consideration when determining your offering price.
- The listing agent might make the second buyer appear stronger because the listing agent knows more about that buyer than you. Write a letter telling the seller about yourself, and include it with the offer.
Multiple Offers on Dated Listings
Older listings can often receive more than one offer if the demand for homes increases. Active listings for sale, sometimes called real estate inventory, change constantly. When inventory falls, demand increases because there are fewer homes to choose from on the market.
If demand increases, homes that buyers passed up one month could turn into hot commodities the next month because the selection is low. Your parameters for a property search will most likely match those of more than one buyer when demand drops. In other words, you'll all be looking at homes at the same time with the same set of criteria, so you're touring the same homes.
If you really want a home, odds are several other buyers will want it as well. That's a good reason to act swiftly and not "sleep on it" overnight, because when you do, another buyer can step in and snatch it away from you.
This phenomenon was witnessed after Hurricane Florence hit the coast of North Carolina in September 2018. Many homes were damaged or destroyed, causing many people to look for homes in a time when inventory was reduced.
Agent Incentives for Multiple Offers
It is important to understand that while the agent has a legal and very important fiduciary responsibility to the seller to obtain a higher price, that higher price won't put much more money into the agent's pocket. Many agents just want the listing to be sold at an acceptable price to the seller.
Real estate commissions are typically divided between the listing broker and selling broker. The listing agent then receives a portion of the commission from the broker. Here's an example:
- The list price is $200,000.
- The listing broker's commission is 3%, or $6,000.
- The listing broker gives half of their commission, $3,000, to the listing agent.
- If another buyer offers to pay $205,000, the listing agent would earn only an additional $75.