The bidding wars convulsing many areas are reportedly driving more home buyers to consider a somewhat cynical tactic: making offers on multiple homes simultaneously. Is the tactic kosher? Some agents shake their heads vigorously, condemning the practice as unethical and counterproductive. But others say casting multiple bobbers may be necessary. The tactic’s viability could also vary by market.
Should a buyer make offers on multiple homes simultaneously?
The biggest challenge for buyers
Multiple offers on properties was the greatest challenge buyers faced while in the second quarter of 2016, according to a survey of 800 Redfin real estate agents across the country.
Just over half of respondents cited multiple offers as the biggest obstacle for buyers. That’s up from 40 percent 90 days ago, when low housing inventory was cited in most cases.
The fierce competition has “given rise to an increasing challenge for sellers and buyers alike – buyers strategically making offers on more than one homes at a time to improve the probability of getting an offer accepted,” Redfin said in a press release on the survey.
Purchase contracts falling through
The most common reasons why purchase contracts fell through last quarter hints toward the trend.
About 4 out of 10 agents said “negative or surprising inspection results” were the most frequent reason, while 25 percent cited “buyers simply changed their mind.” An assortment of these causes often sink purchase contracts that involve buyers who’ve made offers on multiple homes, said Redfin agent Jeremy Paul in San Diego in a statement.
Those buyers often make offers at prices they can’t afford. The idea is to lock down a property with every intention of negotiating the purchase price down once they can cite imperfections uncovered by a home inspection.
“When the seller won’t budge” when asked to lower the price, “the buyers move on,” Paul said.
Lessons for sellers
The multiple-offer tactic is part of the main reason home sellers should remember that the highest offer isn’t necessarily the right one, according to Redfin.
Sellers as well as their agents should carefully vet offers to consider factors in addition to price, such as a buyer’s commitment level to a home and how willing or able they are to close, the brokerage says.
Does it seem sensible for buyers?
Will depend on whom you ask.
Lee Arnold, a Fallbrook, California-based broker, says “you almost have to” make offers on multiple properties at once in Southern California.
“With little to no inventory, it’s almost imperative that you have back-up plans in case you lose out on your first choice home,” Arnold said. “It’s not so much a strategy as much as it is a necessity to make sure your client gets a house.”
But casting a wider net through multiple offers could also backfire, some agents say.
If two or more offers are accepted, backing out of one might not always be easy, depending on the state.
Tracey Freeman, a Westfield, New Jersey-based agent, says even if canceling an offer is easy, the multiple-offer tactic is still a losing proposition for both agents and buyers.
Buyers who make multiple offers on homes usually aren’t fully committed to purchasing both homes, putting the buyers susceptible to making a mistake with the biggest transaction of their lives, she said.
And, at the very least in Freeman’s market, agents can jeopardize their reputation by representing buyers that make offers on multiple properties simultaneously, she said.
Buyers can also arouse a lender’s suspicion by scattering offers across a couple of home, reported by Leslie White, a Washington, D.C.-based Redfin agent.
“If your lender knows you are under contract on one home and then receives a call about your preapproval from a listing agent for yet another home, that will raise red flags and the lender will almost certainly think twice about working together with you,” she said.
The most effective way for a buyer to compete in a frothy market is to prepare offers for multiple homes ahead of time, and then strategize with an agent about which to submit first, taking into account both preference and any offer deadlines, according to White. That way, White said, if the first offer is rejected, the buyer may then immediately pull the trigger on another.
