In a sellers’ market, there is often an increase in multiple-offer situations, where many clients will require additional support from their agent.

Here are a few tips to keep in mind when your clients are involved in multiple-offer situations:

1. Get your client’s instructions

Listing agents are required to present seller(s) with their options when facing multiple-offer situations. Fully explaining the benefits and drawbacks of different options is an important part of fulfilling fiduciary obligations. Additionally, this provides the seller with an opportunity to make an informed decision about how they would like to proceed should they receive multiple offers on their property.

When representing a buyer, explaining what multiple-offer situations are and knowing your client’s comfort level around those situations is also important. Some buyers aren’t interested in a “bidding war” and knowing this helps buyers’ agents customize their clients purchasing experience.

For more information, check out this Real Estate Magazine article: Fear of multiple offers syndrome.

2. Making sense of multiple-offers rules.

RECA states, “It’s the seller who determines the process, including whether they want to disclose the multiple-offer situation to potential buyers”. CREB^® aligns with these rules to ensure members avoid being in contravention of RECA’s legislative requirements and multiple-offer expectations. For more information on the CREB^® Rules related to multiple offers, review Part II 11.03, 11.04 and 11.05.

When listing agents are in a multiple-offer situation, they are still required to respond to member questions (CREB^® Rule Part I 4.04) and to act honestly. Depending on the seller’s written instructions, this may include providing a response that states, “my client has instructed me not to answer this question.”

3. Crafting an offer

After having the necessary conversations with your buyer, strategically constructing the offer is important. Things to keep in mind:

• Risks. If buyers are submitting unconditional offers, we recommend reviewing your brokerage policies and reaching out to your broker for guidance. This may protect both you and your brokerage from any potential liabilities related to representing an unconditional offer.
• Knowing the lending conditions. Some lenders will not fund mortgages where buyers have offered excessive amounts over market or appraised value and clients could be responsible to come up with additional cash to close. To learn more, check out this Globe and Mail article: Buyers in a bind when appraisals don’t match sale price. We recommend advising your buyers to check with their lenders about the terms of their pre-approval.

To learn more about implications and extra due diligence with lenders when offering above asking price, join us on Oct. 14 for our webinar with guest speaker Janelle Bentz, owner and mortgage expert at Dominion Lending Centres.

Click here to register.

4. Purchase terms should be clear and unambiguous

There’s an unsettling trend where buyers are submitting offers with a purchase price of “$2,000 more than the highest competing offer.” Although this might sound like a competitive edge for buyers and a great deal for sellers, it is risky and ill-advised, according to REIX. The transaction could fall apart if an offer like this commits the buyer to more than they can afford. Getting a non-waiver on a financing condition is usually not the desired outcome for the seller.

Substantiating the “highest competing offer” is going to be tough and most buyers will want some confirmation to prove what their offer is beating. Some contract terms may require that a copy of the highest competing offer be provided. However, providing personal information to another party for purposes that were not intended can have implications under privacy legislation.

We recommend that you and your clients seek a legal opinion before putting forward or accepting purchase contracts such as these.

To learn more about drafting enforceable contract terms, join Jeff Kahane on Oct. 6 for a webinar on Drafting Clauses- Enforceable Terms & Conditions.