A "seller's market," in which competition for houses gives sellers the advantage, is the result of all kinds of things we have no control over, from the federal or local economy to the sudden popularity of a city or neighborhood.

Prices tend to rise with demand, and buyers are more likely to meet or exceed your asking price, throw in bonuses, offer their firstborn—you get the picture. When you're hot you're hot, and chances are good that you'll be faced with multiple offers.

If you have a listing agent—and this is one of those times you'll be glad you do—he or she will lead the process and handle the fine points of negotiating. The other most important tools you can bring into a multiple-offer scenario are an awareness of legal landmines, a sense of ethics, and negotiating etiquette.

Legal issues

Disclosures. Be smart from the start: order your own inspection before you even put your house on the market. You have nothing to gain by ignorance except the risk of an eventual lawsuit or costly work orders, and you'll have the choice of making repairs or reducing your asking price if major work is required. Consider purchasing homeowner's insurance to ensure that after a clear inspection all major areas are covered for up to one year. You'll probably have more showings and fewer complications with negotiations and closing.

What's your home worth?

Declining a good offer. If dreams of striking it rich tempt you to turn down a reasonable offer with good terms from a ready, willing, and able buyer produced by your agent, consider that you will almost certainly still owe the full agent's commission. After all, the agent has fulfilled his or her part of the agreement. If you later accept another offer, you'll again owe a full commission. On a $200,000 house at 6% commission, we're talking about an additional $12,000.

Earnest money. Buyer agents should know better, but if a bidder offers to make out his or her check for earnest money in your name, step very carefully. Better yet: consult a real estate attorney. If any complication turns up with your property, or if the sale falls through for any reason, the ownership of the earnest money may be in question. Broken contracts are breeding grounds for lawsuits, so it's to everyone's benefit to leave this to the experts—typically the listing broker or other third party. In case of a dispute, the broker is then responsible for deciding how to divide the check (taking local custom and state law into account) while avoiding legal challenges. Brokers are also in a better position to work out a compromise between the buyer and seller. (If a compromise can't be reached, the broker may file an "interpleader" action, forcing the courts to make a determination.)

Maintain confidentiality. Some common real estate wisdom encourages sellers to let all prospective bidders know if you're expecting other bids. It lets them know where they stand and can motivate them to lead with their best offer. But if you do so, be extremely careful not to release private or confidential information. In fact, the best time to do this is before you've opened the bids (what you don't know can't hurt you).

Be honest about your interest level. Misleading buyers whose offers you aren't considering in order to beef up competitive bids is not only "bad juju," but agents will get the word out fast, and you'll notice a mysterious drop in the number of showings your house gets. It's never to your advantage to deceive prospective buyers—or hard-working agents.

Don't "shop" offers. Sure, when you receive your first offer, your agent will probably let his or her colleagues know about it. This gives the firm's buyer agents a chance to scare up some competition. But woe to the agent who divulges the amount of a bid or, in the words of one real estate agent, "calls everyone in town prospecting for new offers." It could lead to legal reprimand and even the revocation of a license.

Treat your agent as an ally. A buyer may want to contact you directly before making an offer. There's nothing wrong with conversing with a prospective buyer, but don't bargain behind your agent's back. If discussions lead to a sale, you'll still owe your agent's commission fee, and in the worst case it could lead to a lawsuit. You'll also want to guard against being too candid—revealing your minimum selling price, for example.