Reader question: “We are about to take the plunge and buy our first home, but our real estate market is very hot right now. We’ve heard that homes are selling fast, and going under contract within days of listing in some cases. It makes me think we’ll have to make offers on more than one house, to cover our bases. How does this work, and is it even legal? Can we put in offers on multiple properties without losing the earnest money deposit?”
Let me start with the short answer. Yes, in many cases it’s possible to make offers on more than one home at a time (though some local real estate laws might forbid it). But it might cost you money in the form of a lost deposit. Much depends on the wording of the contract and your local laws. So it’s a question better asked of a local real estate agent or attorney.
Can I Make Offers on More Than One Home?
In most cases, the act of making multiple offers on homes is not really the issue. After all, one seller wouldn’t know that you’d made an offer on another property — unless you told them. They’ll only know that you’re offering to buy their home. So what’s the big deal?
But proceed with caution. Problems can arise when more than offer gets accepted at the same time. In such cases, the buyer would have to choose which house they want most, and cancel the other contracts. And this could lead to the loss of earnest money. Many agents consider it to be unethical, as well. And speaking of that…
The Real Estate Agents Weigh In
We wanted to know what real estate agents had to say on this subject. So we reviewed dozens of responses to similar questions on Trulia and Zillow. The two responses below are representative of what many professionals had to say.
Enrique Tejera, a Miami Beach real estate agent, summed it up nicely on the Zillow Q&A website. Here’s how he responded when a reader asked if he could put in multiple offers:
“Theoretically yes, but it’s VERY risky and really not good practice. The sales and purchase contract is a commitment to purchase a property. You could lose your deposit if two offers are accepted simultaneously.”
San Diego real estate agent Khrystyna Chorna echoed this sentiment when responding to a similar question on the Trulia Q&A website. Here’s what she had to say:
“It is not illegal [to make multiple offers]. It is not ethical either though. If both sellers accept your offers you can still back out from one of them based on other issues … home inspection, etc. We as brokers, should not recommend it, but it is often done in this market.”
This seems to be the general consensus among real estate agents. It is widely regarded as legal, but unethical, to put in offers on more than one home. (But again, real estate laws vary by state. So you have to research this locally.)
In red-hot housing markets, some agents claim it’s necessary to make multiple offers. Otherwise, your home search could be long and fruitless. Other agents stick to their guns on this subject and claim that it’s not wise to make more than one offer, due to the risk of losing your earnest money deposit. You’ll find opinions on both sides of the fence, though the two responses above represent the consensus.
How the Earnest Money Deposit Works
When you make a purchase offer on a home that’s for sale, you’ll probably be required to put down earnest money along with your offer. This is commonly referred to as a deposit, and that’s essentially what it is. You deposit a certain amount of money to show the seller you are serious about buying their home — and so they’ll take your offer seriously.
In a typical real estate transaction, the buyer gives the earnest money to his or her agent in the form of a check. The agent puts the money into an escrow account. The escrow account is sometimes managed by the title company.
- If the buyer proceeds with the purchase, the earnest money deposit would be applied to the purchase price.
- But if the buyer backs out of the deal without a good reason, the seller could keep the earnest money.
So if you’re making purchase offers on more than one home at a time, and you are paying earnest money each time, there’s a good chance you could lose the deposit.
In closing: My advice is to make a strong offer on one property at a time, backing it up with market research and comparable sales data (as explained in this article).