You’ve been shopping for a home and find two that you like. You don’t want to let them get away, but you’d like to see which one gets you the better deal. Can you bid on both of them at the same time? This is a very common home buyer question, with a somewhat complex answer.
Are your offers valid?
For a real estate contract to be valid, one of the components is that there must be consideration. Consideration is something of value that is exchanged by the parties. In a real estate contract, consideration is the purchase price. I will pay you $300,000 for the house. Unless you are independently wealthy, you probably do not possess consideration for more than one home purchase, so which contract is valid?
Also, a real estate purchase & sale contract is going to have pretty clear language about how you intend to pay for the home. In Washington, most folks use the NWMLS agreement which states the following: “Buyer represents that Buyer has sufficient funds to close this sale in accordance with this Agreement and is not relying on any contingent source of funds, including funds from loans, the sale of other property, gifts, retirement, or future earnings, except to the extent otherwise specified in this Agreement.” Once again, if you put two offers out there with this language, you are lying to one of them, and presenting a contract that is not technically valid.
Is your approach fair to the seller that you reject?
Being a savvy home shopper, you should explore every home possibility that works for you, but you do need to be conscious of how your actions may affect a seller. When a contract is mutually accepted by both parties, it changes status in the MLS to “pending.” Pending statuses alert other agents that the home is under contract. It also changes the status on public websites, indicating to buyers that the home is now unavailable.
Having a home come off and on the market multiple times is potentially a negative signal to future homebuyers. It may leave them with doubts about the price or condition of the home when another offer backs out. If your strategy means that you have taken Seller #1’s home off the market, only to back out two days later because you came to agreement with Seller #2, you have not been fair to Seller #1. Someday you are going to sell your home, and trust me, you won’t want to be in this situation.
What about short sales?
Short sales put an interesting twist on this question. A typical short sale approval may take 3-4 months after your offer is accepted. It is quite common for buyers to keep shopping, and often you may find a home you like better and can close on sooner. If you are going to offer on another home while you are awaiting short sale approval, you don’t want to back out of the short sale to make your offer. If that offer fails, you are left without either house. You also don’t want to hit the reset button on the short sale approval process if you don’t have to. My usual advice if you have a pending short sale is to go ahead and make an offer on another property, but once you are in contract on another home, be courteous and rescind your offer immediately so that they can start looking for a new buyer as soon as possible.
What about bank-owned properties?
Bank-owned (REO) homes are also unique. A bank isn’t going to go back and forth with countless written offers. They are going to negotiate informally on terms for a few days. Once terms are agreed upon, they will issue a contract for buyer signature. That gets returned to the bank for signature. You do not have a binding contract until both parties have signed, so this may offer you flexibility on making other offers.
Highly competitive bidding
You may also find yourself in competitive bidding wars in certain areas. It may take bidding on multiple houses to finally land one. If you know that you are one of five bids, your odds of losing are pretty high, so it may be prudent to place other offers at the same time so you don’t lose out on everything. My advice in this situation is to be as honest as you can be. If you win a bid at 5PM but are waiting for another bid to be reviewed at 7PM that you like a little bit better, let the first seller know the moment something happens so that they don’t needlessly take the home off the market.
Treat others as you would want to be treated
Throwing out multiple offers at the same time may maximize your options, but my normal advice is that you should pursue the one you want most first. If competitive bidding or short sales are in the mix, do what you have to do to get yourself a property, but be fair to the seller in the process. Contract law aside, it is neither fair nor ethical to take someone’s home off the market while you “make up your mind” about which one you want the most.