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When you make an offer on a home and you're in competition with other buyers, there are several possible outcomes. Your offer could be accepted or it could be rejected. The seller might counter your offer, in either primary position, or in a backup position. Or the seller could issue a multiple counteroffer.
Sellers who are blessed with offers from more than one buyer will usually counter one offer at a time. A typical scenario might go like this. If one offer is far superior to the others, the sellers will work with this offer first.
Purchase offers are complicated legal documents. Even if the price is right, details like the closing or possession dates may need fine-tuning. The seller accomplishes this by issuing a counteroffer. If the buyer accepts, the contract is ratified. If the counteroffer is not accepted, the buyer can either drop out of the negotiations or issue a counteroffer to the seller's counteroffer.
The counteroffer process continues until the parties either reach a satisfactory agreement or call off the negotiations. If the negotiations fail, the seller can move on to the next best offer.
Often sellers will counter more than one offer at the same time. One will be countered in primary position. The other offers will be countered for backup position. If there is more than one possible backup, the counteroffers will be ranked as backup offer number 1, 2 and so on.
HOUSE HUNTING TIP:
Buyers often wonder if they should accept a backup offer. In a multiple offer competition, particularly one that is frenzied, it's often worthwhile to accept a counteroffer for backup position number 1.
Some buyers suffer buyer's remorse soon after acceptance when they realize they bid higher than they should have. If the primary buyers back out, and you're in first backup position, your offer will be elevated to primary position. You'll avoid having to go through another bidding contest.
Multiple counteroffers are different. Rather than work with one offer at a time, the sellers issue counteroffers to several buyers at once. The buyers are notified that counteroffers have been issued to more than one buyer. Each buyer has a chance at being accepted in primary position. But, final acceptance rests with the sellers.
There are pros and cons to multiple counteroffers. Some buyers like them because it gives them a second chance if their price wasn't high enough. In a multiple offer bidding situation, it's difficult to know how high you need to go to be the successful bidder. And, of course, you don't want to pay more than you have to.
Let's say that you make an offer on a property that's listed for $300,000. There are five offers in all. You think the property is priced on the low side, so you offer $325,000. The sellers counter the three highest offers--yours included--at $335,000. You can accept this, reject it or counter back with a different price. But, even if you do accept the sellers' price, you don't automatically get the house. The sellers still have the right to choose the winning bid.
Multiple counteroffers can backfire. A seller in Rockridge, Calif., issued multiple counteroffers to two buyers. One dropped out of the contest. The other countered back at a lower price. By using a multiple counteroffer, the seller ended up selling for less than he could have if he'd worked with one offer at a time.
THE CLOSING:
Greed gets the best of some sellers who try to use multiple counteroffers to increase the sale price above the highest offer they receive. Buyers have been known to walk away from this sort of negotiation.
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