In the Realtor community around Greenville, SC, we haven't really had to talk with our buyers and sellers that much about multiple offers in the past five years. Though there are certainly situations where that never went away, like bank foreclosures and such, for the most part, any multiple offers we saw lately usually came in at "highest and best" well below list price.
This trend has changed as of late, mainly due to the fact that many folks have been starting to get back out into the marketplace, excited about moving again.  Statistics for the Greater Greenville Association of Realtors (GGAR) showed a 20% increase in 'under contracts' from the same quarter in 2011 and was 10% higher than 06' and 07' at the height of the market. With an inventory level that is much less than in those previous years, that has created a very big demand for housing. We are now seeing quite a few homes being sold in "bidding wars" in the first few days on the market. This has led to the next domino to fall, which is pricing increases.  GGAR statistics reported a 4% increase in the median price for homes in our market for the first quarter of 2012 alone!
So that brings me back to my original question for discussion...which is, how do these multiple offer situations typically play out?
There are various ways of handling multiple offers as a listing agent, or one who represents the seller. We typically let all the parties know the situation and ask that they send in their "highest and best" offer by a certain time. Once all the offers are in, we present them all at once to our seller and let them decide which one works best for their needs.
All offers are NOT created equal as you might imagine, and two might appear identical on the surface and offer different scenarios for the seller. Just recently, one of my buyer clients lost out on a dual offer situation because the other party was putting more money on their down payment. Other than that, we were told both offers were identical. The seller just felt that given all things being equal, they felt safer going with the buyer who seemed to be a little more stable financially. Logical... unfortunately for my buyer. As a buyer's agent, it was my job to let my client know that the house could easily sell for full price or more and that if you really wanted the house, wouldn't it make sense to offer $500 over list? They just offered full price and lost!
There are many other variations of multiple offer situations, including, but not limited to the listing agent actually sharing the offers with all parties, essentially creating an auction type scenario. This one is not as common in our marketplace, but has been listed as an acceptable method if the seller so chooses. This one is riskier around here because folks tend to get a tad frustrated, feel taken advantage of, principle takes over and the deal falls apart.
Some agents feel strongly that if multiple offers come in, they advise their seller to work with the first one that came in until it has been fully negotiated, and then if still available, move to the next one, and so on. This makes it more of an ultimate "fair play" scenario in my opinion because you are giving the legitimate first offer an opportunity to have the first right of refusal. This isn't necessarily the best case scenario for the seller though, so we only see this in the Realtors who have been in the business for decades and do things the "old fashioned" way.
However you look at it, the tables have definitely turned in some respects for an advantage to the seller in the more desirable neighborhoods in Greenville. And I can certainly vouch for one of my buyer clients in STINKS for the buyer in those situations.
Happy house hunting! Call me if you want someone who has the know how to look out for your best interests!

J. J. Bowers