Most people will describe the process of making an offer to purchase a property as exciting and nerve wracking at the same time. You're putting everything you have on the table in front of a few people you don't know and making one of the biggest commitments of your lifetime.
So what happens after you’ve written your offer? I want to give you a little behind the scenes peek into how offers are presented and responded to in today’s market.
A majority of listings on the market today are expecting multiple offers to come in and will usually set a date to collect offers. You can expect that date to be around 7-10 days after the house is listed. So even if you would like to make an offer right away, sellers often won’t consider any preemptive offers before that date.
In most instances, once an offer is written, your agent will present it to the listing agent or the seller directly. Depending on the seller’s preference, your agent can present your offer in person, drop it off to the listing agent's office in a sealed envelope, or send it by email (or even the ol' fax machine) to the listing agent.
If your offer is presented in person and the seller is present, you may get a response right then and there or they may review all the offers and respond after. If your offer is dropped off in a sealed envelope or emailed/faxed in, you'll have a response at a later point in time.
Once your offer is in the seller’s hands it becomes their property and they can really do whatever they want with it. They can accept your offer, they can counter it, they can share it with others, or they can do nothing at all.
If they don’t respond immediately to your offer, anything could happen (and that’s when things can get even more stressful). If there are multiple offers, they could use your offer as bait to get others to improve their offers. If you do not have a response before your offer expires (assuming you've allowed a reasonable amount of time to respond), the seller is likely either considering other offers or trying to lure another offer in. In cases like this, sometimes buyers will rescind or modify their offers. Once an offer is accepted, the seller is bound to it, and if there are no contingencies, then it’s a done deal.
When I purchased my house, there were some twists and turns from when the offers came in to when one was accepted. There were four offers that came in on the property. Our offer was at 13% over asking price with no contingencies and a 21 day close of escrow. I presented the offer in person to the listing agent at 4:00pm with an expiration at 10:00am the following day. The seller decided to take the evening to consider which offer they wanted to accept. Even though I guide clients through this process all the time, that night my wife and I could barely sleep.
10:00am rolled around the next morning and we were informed that an offer hadn’t been formally accepted yet, but the seller was intending to accept a cash offer at 16% over asking with no contingencies and a 5 day close of escrow. My wife and I were devastated, since we loved the house and had put everything we had into our offer. Late in the afternoon the seller’s agent called us and told us that the seller had a change of heart and decided to sell us the house because they wanted the property to go to a family. Also, the seller was paying capital gains taxes on the sale of the property, and after taxes there wasn’t as substantial of a gap on the profit they would make between the two offers.
In today’s market, buyers may go through this process several times, and unfortunately may even have several good offers rejected just because the market is so competitive. I make a point to be transparent with my clients at every step of the way because I think it can help alleviate some of the anxiety that comes with buying a home. Don’t be shy about asking your real estate agent what is happening or where things stand while you’re waiting to hear back on an offer. If it doesn’t work out, your agent may have some advice on how to improve your offer the next time around. Or if your offer is accepted, then congratulations are definitely in order for the purchase of your new home!