You’ve found ‘the’ house, and you’re negotiating a deal, or the seller has even accepted your offer. Then you get the dreaded call from the agent you’re working with — another offer has come in on the house. That scenario is not uncommon, but it always comes as a shock to buyers, particularly if the house has been on the market for a while. It’s never a call I like to make, but it’s a reality of the business. A deal isn’t firm and binding until there are fully executed contracts. It can take a few weeks from offer acceptance to executed contracts, and during this period a seller is free to entertain another, higher offer. (Likewise, buyers are free to keep shopping for other houses.) Note: there is some gray area here about whether an accepted offer is, in fact, a type of contract, but I’m not aware of that being taken to court here to attempt to enforce.
When a house has an accepted offer on it, or is in negotiation and the parties may be close to a deal, there’s pressure on other buyers who might be interested to jump in. They don’t have the luxury to think about it for a few weeks, so an offer on the table or an accepted offer can motivate other buyers to act sooner rather than later. There’s also another psychological factor at play. An offer on the table can give a house a “Good Housekeeping Seal of Approval”; if somebody else is interested in the house, it must be a good house.
When there’s a second offer, sellers have the decision about what to do. Some sellers will stick with the first offer, particularly if it’s a good one or they perceive the buyers as easy to work with. Some will offer the first buyers the opportunity to match or better the other offer, or ask all parties to submit a best and final offer. Occasionally, if the negotiations to reach the first deal have been rocky or the sellers perceive the buyers as difficult, they may just go with the second deal and not give the first buyers a chance to counter.
I’ve been on both sides of this fence. This year already I’ve worked with three buyers who wanted a house that already had an accepted offer on it (but no contract yet) and we were able to knock out the first deals. I’ve also worked with two buyers who were bumped by a higher, competing offer. It’s probably easier to be the bumper than the bumpee. Buyers who are knocking out another offer are coming in with the gloves off and don’t have a lot of emotion attached. Buyers who are defending their position are more conflicted — they’re often angry or upset that this has happened, and their first inclination is to take their toys and go home. Advising what to do can be difficult, because the buyers look to me for my guestimate on another similar house coming to market at a similar price. With some buyers and houses, I just know this is the right one, and advise that they make a strong play. After 14 years in this business, I know when I see “the twinkle”. For other buyers and houses, particularly if the house involved a lot of compromises and they have the budget for something more perfect, I might advise that they make a shot but if they lose it, it’s not the end of the world.
For sellers, it’s a tricky situation. The first buyers are usually more emotionally connected to buying your house, and made their offer without duress. Follow on buyers can be less connected, and feel pressure to jump in because of the first deal. If a seller goes with the second deal, and it falls through, it’s very unlikely you’re getting the first buyers back, even if they haven’t found another house.
Personally, I wish the system was such that we didn’t end up in this situation. In almost every other state in the nation, Realtors write up offers on forms that become binding contracts after a short period of time, usually 72 hours or less. At that point, the parties are bound. There isn’t this lengthy offer-contract process that we have in this part of New York, with attorney prepared contracts, that can drag out for two or three weeks. It’s a no-mans land where buyers who think they have a deal are really sitting ducks. (Across the river, in Pennsylvania, where Realtor fill-out contracts are the norm, the parties are bound in 72 hours.) This situation is unlikely to change in New York anytime soon.