The number of homes available for sale in a seller's market is usually very low, as is the absorption rate—the number of months it would take to sell every home on the market based on the present rate of sales.
More than one buyer might submit an offer for the same property under these circumstances, resulting in multiple offers on the most desirable homes. Sellers enjoy the luxury of choosing the highest and best when they receive numerous offers.
The downside for buyers is that not everyone can buy the same house. Only one will be the lucky bidder, and the others will suffer from offer rejection. Some might be tempted to submit offers on more than one property to increase their chances of success with at least one of them.
- Some buyers might be tempted to submit offers on more than one property to increase their chances of success.
- Be careful about doing this because it can have legal ramifications. Also, multiple purchase offers might result in more than one acceptance.
- Be honest from the start and disclose that you're making multiple offers—it will hopefully prevent you from being contractually and legally committed to buying two or more homes.
Are Multiple Offers Legal?
Contract law includes a "good faith and fair dealing" covenant in some states. It's possible for buyers to break the good faith covenant when they can afford to buy only one home, yet they make purchase offers on many properties. Be careful because this can have legal ramifications.
Buyers should always seek legal advice before peppering the landscape with purchase offers.
The Earnest Money Deposits
Sometimes buyers photocopy an earnest money deposit and submit a copy of the same check with each purchase offer. This practice can void each contract. Only one offer actually has a deposit securing the purchase offer when there's only one earnest money check.
The other offers technically have no deposits, which can invalidate them.
Multiple purchase offers might result in more than one acceptance. A buyer could end up under contract on more than one offer if they don't contain contract contingencies that would allow the buyer to cancel the transaction without consequences.
Build contingencies into your offers if you're determined to make more than one. You can even hinge one of your contingencies on the acceptance by another seller of another offer. Your other offers will automatically become null and void after the first is accepted, or if other of your contingencies aren't met.
A contingency effectively says to the seller, "I'll buy your home if this condition is met."
Otherwise, all sellers involved might expect the buyer to deposit funds and close each of the transactions. Buyers who refuse to perform could find themselves in court and liable to the sellers.
An Option for Multiple Purchase Offers
Many buyers are eager to buy bank-owned homes, but one of the problems with foreclosure homes is that these "REOs" tend to draw a lot of interest from buyers, and REO banks can take a long time to respond.
The answer for some buyers is to write a multiple purchase offer and submit it on several bank-owned homes at the same time. This can avoid liability for bad faith if they're each written as conditional offers.
The offer would contain language that makes it subject to the buyer's acceptance after the REO bank accepts the offer. It lets the REO bank know right up front that the buyer has submitted numerous purchase offers.
Always consult with a qualified local real estate lawyer if you're considering making multiple purchase offers. Rules and laws can vary by state.
Be Kind and Honorable
Put yourself in the sellers' shoes. Ask yourself how would you want the situation handled if you were the one selling your property and a potential buyer was wallpapering the town with offers to other sellers.
Be honest from the start and disclose that you're making multiple offers. Immediately take the steps and the time necessary to revoke all your other offers if one is accepted. It's the right thing to do, and it will hopefully prevent you from being contractually and legally committed to buying two or more homes.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.