Making Offers on Multiple Properties
A seller’s market is, as the name implies, great for sellers, but can often be very frustrating for buyers. In a seller’s market, like today’s market, inventory tends to be low relative to the number of buyers, and so properties tend to sell quickly and for above asking price. As a result, many buyers will want or need to simultaneously make offers on multiple properties. There are risks associated with this strategy, but there are also ways to mitigate the risk of making offers on multiple properties.
The Risks of Making Offers on Multiple Properties
Theoretically, making offers on multiple properties carries the risk of having multiple offers accepted. Typically, a contract is created when a seller accepts a buyer’s offer. As a result, if a buyer makes multiple offers, it is possible that multiple sellers will accept, thereby placing the buyer in the position of either buying two properties or being forced to cancel one of the contracts. This could potentially expose the buyer to the “liquidated damages” clause contained in the purchase contract, resulting in losing the buyer’s “earnest money deposit” (typically 3% of the purchase price). Some sellers and agents would go so far as to label making offers on multiple properties as unethical or in violation of the breach of duty of good faith and fair dealing, which is implied in every contract.
How to Mitigate the Risks of Making Offers on Multiple Properties
Notwithstanding the foregoing, there are ways to avoid the risks of making offers on multiple properties. The simplest and cleanest way of doing so is to attach an addendum to the offer that discloses exactly what the buyer is doing, and makes the creation of a contract contingent upon the buyer’s confirmation of acceptance. In other words, rather than a contract being created upon a seller’s acceptance, the contract should be written so that a contract is created upon confirmation of the buyer’s intent to enter into the contract. This strategy also places additional leverage in the buyer’s hand by communicating to the seller that the buyer is interested in several properties, and therefore may be unwilling to raise his or her offer price.
In sum, while there are risks associated with unreservedly and simultaneously making offers on multiple properties, those risks can be easily mitigated with the assistance of a competent real estate agent. For more information on how Esquire Real Estate Brokerage, Inc. can help you in the Los Angeles real estate market, feel free to give us a call at 213-973-9439 or send us an email at firstname.lastname@example.org.