Is it OK to Make Multiple Purchase Offers?
Question: Is it OK to Make Multiple Purchase Offers?
A reader asks:"We didn't set out to do multiple purchase offers, but my wife and I are having a really hard time trying to buy a home. We keep getting beat out on the homes we like by cash buyers. A guy I work with says we should be making multiple purchase offers on as many homes as possible but my agent isn't too keen on the idea. This sounds like a good plan to me, though. My wife is all for it, but thinks I should ask you. Is it OK to make multiple purchase offers?"
Answer: If I collected a dollar every time a buyer asked me if it was permissible to write multiple purchase offers, well, I still wouldn't be filthy rich but I'd be living rather well in Tahiti. However, I can understand a buyer's desire to write multiple purchase offers, especially in a seller's market. It's tough.
In a seller's market, typically inventory, meaning the number of homes available for sale, is very low, and the absorption rate is low as well. Absorption rate is the number of months it would take to sell every home on the market, based on the present rate of sales.
Under these circumstances, more than one buyer might submit an offer for a home, resulting in multiple offers on the desirable homes. When a seller receives multiple offers, a seller enjoys the luxury of choosing the highest and best offer. The downside for buyers is many home buyers in these situations suffer from offer rejection.
Not everybody can buy the same house.
Drawbacks to Making Multiple Purchase Offers
- Breach of Good Faith and Fair Dealing Covenants.
In some states, contract law contains a good faith and fair dealing covenant. If a buyer can afford to buy only one home yet makes multiple purchase offers on many homes, it is possible that the buyer has broken the good faith covenant, which may have legal ramifications. Buyers are advised to seek legal advice beforehand.
- Sending the Same Check With Each Multiple Purchase Offer Could Void the Contract.
Sometimes buyers photocopy an earnest money deposit and submit a copy of the same check with each purchase offer. Since there is only one earnest money deposit check, only one offer actually has a deposit securing the purchase offer. The other offers have no deposits, which may invalidate and / or void the multiple purchase offers.
- Multiple Purchase Offers Could Result in Multiple Acceptances.
If the offers contain no contract contingencies that would allow the buyer to cancel the transaction without consequences, a buyer could end up in contract on multiple purchase offers. In that event, all the sellers may expect the buyer to deposit funds and close each of the transactions. Buyers who refuse to perform could find themselves liable to the sellers and / or in court.
Protection Available for Multiple Purchase Offers
The answer for some buyers is to write a multiple purchase offer and submit on a bunch of bank-owned homes at the same time.
These buyers might be able to write multiple purchase offers that could avoid liability for bad faith if they are written as conditional offers. This means the offer would contain language that makes the offer subject to the buyer's acceptance after the REO banks accepts the offer. It lets the REO banks know that the buyer has submitted multiple purchase offers.
For more information about multiple purchase offers, please consult a qualified real estate lawyer. Don't take legal advice from an unqualified agent.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.