With supply down and interest up, there are many more multiple offers on houses being seen this spring. They are, obviously, more complicated for both buyers and sellers (not to mention agents!). Sometimes, they can lead to a feeding frenzy on a property; other times, buyers can all walk away, not wanting to get drawn in. So what's a seller to do?
If you price your home correctly, that price will be a call to action. In other words, buyers, who are very sophisticated about the market in the Internet age, will know that it won't be on the market long. If they are interested, they will need to act quickly. They also know that they can withdraw during the inspection process, so they may act, even when they haven't fully committed(sellers should take note of this!). They also know, pretty well, what the house is worth, so they will bid at least full price, figuring that other people will as well. In fact, we often tell them to make their "highest and best" offer--I say that people should offer what they would be upset to learn that someone else bought the property for. This often takes place in a second round of offers, where everyone who has expressed interest has a chance to put in one last contract.
The seller should set a date to consider all offers, and make that soon; most offers are only good for a period of hours or a few days. With multiple offers, sellers should assume that buyers are continuing to look at other properties, and should not feel that they are in the driver's seat, and can think about things too long. S/he should choose one offer, using price and terms to pick the best one for them, and negotiate it through to a signed contract.
Then the inspections begin. That's where it might be good to have a back-up offer, which often makes buyers less insistent during the inspection negotiation. Sometimes, if a buyer plans to do enough work to the property, s/he might even waive the inspections. Often, buyers waive the mortgage contingency, although that doesn't always mean that they don't plan to get a mortgage. If they don't, they often ask that the house "appraise out", meaning that there is an appraisal anyway, to make sure that they don't overpay, although that's a subjective term. If they are getting a mortgage, the bank will do an appraisal, so the same vetting process on value will occur. We don't consider the home sold until the contingencies are satisfied, so keep your fingers crossed both as buyer or seller, and don't let up on the timeline.
This explanation assumes that the sellers proceed with one contract at a time. While it is legal to ask for all offers, and then sign one, or to negotiate (but not sign!) with more than one buyer at a time, it gets confusing and frustrating for everyone. Final advice: Don't be greedy. If you have an offer at or above what you would have sold for, take it. Those last dollars aren't guaranteed, especially if it doesn't appraise at that higher amount. Take the money and run to your new home!