What to expect when your home gets multiple offers

multiple offersYou’re selling your Silicon Valley home, and your real estate agent just informed you that you have not one, but several offers coming in.  Joy!  What should you expect in the way of prices being offered?  Today we will discuss what can, and often does, happen.

(1)  All in a fairly tight range of pricing:  Sometimes, the bids all come in at about the same value or within a small range.  For instance, let’s say your house is listed for $900,000 and you get four offers.  In this case, the bids could be at $920,000 and $925,000 plus two more at $930,000.  These are all pretty close to one another.  The terms could be different, though.  Perhaps the lowest one is all cash.  Maybe the middle one has no contingencies.  You get the idea.  In any event, when you see that “band” of pricing, it’s a pretty good indicator of where true market value is.

It should be noted that in some markets, multiple offers are not over list price.  This can be a factor of the market conditions at the time (such as a declining market) or a reflection that willing and able buyers simply find the list price to be too high.  Do not assume that multiple offers will always be over list price (though at this writing, virtually all are). When the offers are similar, the terms or even little things can make a difference (who wrote a letter to the seller? who was a pest at the open house, grumbling about the condition?)

(2)  Tight range plus several at best price:  More often, especially with larger numbers of contracts, there’s a spread that includes a close range of offers, but a few of them are tied for the highest value or very close to it either within or above that range.  Here’s how it could look visually.

Multiple offer potential spread of bids

With the example above, what I’ve seen happen is that most of the potential buyers are looking at the closed sales and deciding that they reflect current value.  The others, though, understand that the closed sales reflect contracts which were most likely accepted at least 30 days ago, and are considering the trajectory of price appreciation.  In other words, if home values are rising at the rate of X per month, they are mentally seeing where this price should be now.  They are saying “let’s add 10% to the comps to get to today’s value” or some such formula.  These multiple highest bidders are the ones who understand the market when it’s moving up fast.