A buyer suggests that she'll purchase your house if you lower the price by several thousand dollars. It reminds you of a similar offer you rejected when the property first hit the market. What about getting a bidding war going between the two prospects at this point in order to drive the price up?

Proceed with caution.

Igniting a bidding war between buyers can backfire leaving you empty handed without a buyer in sight.

Let's first cover the most common questions seller's ask when working with multiple buyers, followed by suggestions on how to maximize offers without alienating prospects.

Questions may include:

1. Do I legally have to inform the first buyer that I've lowered my asking price?

2. Is it in my best interest to contact the first buyer to get a bidding war going between both interested parties?

Let's look at the situation from your side as well as the buyers'.

For a seller, more offers are usually preferable to less. Offers from multiple buyers could allow you to maximize your sales price and/or trim your closing time and closing costs due to competition between the parties. If the previous buyer is still interested in purchasing your home, she might be more motivated than before if she thought she'd lose the house again. Conversely, she may have purchased another home and/or lost motivation when you declined her previous offer.

There is equal if not more caution in placing the current prospect in a bidding situation. If there haven't been other serious prospects of late for the house and all at once one appears, it could look like you planted the competition to drive up the price even though you said you'd consider a lower-priced offer. A prospect might view this tactic as merely part of the purchasing game while another could take great offense and cease negotiations entirely. Power-play tactics like these can alienate a buyer, wondering what other games the seller has up his sleeve.

How can you best handle and navigate multiple buyers without alienating one or all?

Here's one possible approach. Encourage the current buyer to make her best offer for your consideration since she appears most motivated at this point. Meanwhile, contact the previous buyer to see if she is still interested in the property. I would not recommend using a possible lower price to entice the first buyer to make another offer. If she is truly interested, it's possible she could offer full price for the property.

If you take this approach, make sure you allow ample time to consider the second purchaser's offer before accepting it (especially if it's lower than list price.) It often takes time for a previous buyer to weigh the pros and cons of getting back into negotiations on a property (especially if the first round was disheartening). “Murphy's Law of Real Estate” often finds that as soon as a seller accepts a lesser offer, a full-price one will appear!

The bottom line is that while it's okay to hedge your bets, pitting both buyers against each other to bid up the price can result in only one loser---you.