Good communication is key to helping potential buyers navigate multi-offer situations.
Dealing with all parties fairly
When a property is in high demand, the chances are that more than one buyer will make an offer on the property. This can result in a multi-offer situation in which the vendor can choose whichever offer they think is the most desirable and move on to negotiate if necessary.
While your obligation is to the vendor, you must also take care to treat all parties fairly and ensure the process is transparent. The Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 (Code of Conduct) rule 6.2 states:
A licensee must act in good faith and deal fairly with all parties engaged in a transaction.
You must also ensure that you are not putting any pressure on your vendor or potential buyers when trying to secure a sale. This is outlined in rule 9.2:
A licensee must not engage in any conduct that would put a prospective client, client, or customer under undue or unfair pressure.
Communication is vital in a multi-offer situation. You must ensure that you keep the vendor updated with all offers and interests from buyers. Rule 9.3 states:
A licensee must communicate regularly and in a timely manner and keep the client well informed of matters relevant to the client’s interest unless otherwise instructed by the client.
Prospective buyers should be informed they are in a multi-offer situation and this is often done by having them sign an acknowledgement of multi-offer form. You should tell them they should be putting their best offer forward because they may not have the ability to go back and make changes later.
Equally, if a buyer pulls out of a multi-offer leaving one interested buyer left to make an offer, that remaining buyer should be informed in case they want to review their offer before it is presented to the vendor.
When buyers refuse to sign a multi-offer form
Although multi-offer processes are standard industry practice, they are not required under The Real Estate Agents Act 2008 or Code of Conduct rules.
When a potential purchaser has signed a written offer but refuses to sign a multi-offer form or acknowledge they are in a multi-offer situation, rule 10.10 of the Code of Conduct requires that offer is still presented to the vendor. You may wish to document that the buyer was informed of the multi-offer.
There is always a degree of flexibility in multi-offer processes. If an agency’s standard multi-offer process is not suitable for a particular situation, then you may depart from it as long as the process remains fair. In that case, the best practice is to advise the parties that the process has changed from what has previously been explained to them.
Presenting multi-offers by phone
If a written offer is provided in either hard copy or electronically, it’s possible for you to present the offer verbally to the vendor. It’s not enough to make the vendor generally aware of the terms of the offer, the explanation must be accurate, and you must convey enough detail for the vendor to be adequately briefed.
Rule 10.10 requires all offers to be presented to vendors provided they are in writing.
A licensee must submit to the client all offers concerning the grant, sale, or other disposal of any land or business, provided that such offers are in writing.
The Real Estate Agents Disciplinary Tribunal (the Tribunal) has confirmed this rule does not strictly require the vendors to be given the written offer itself, but it is highly recommended to do so. This is because the written offer provides the vendors with complete information that is clearly recorded and can be the basis for negotiations.
As a matter of best practice, the written offer should ideally be sent before, or at the same time as any telephone conversation. If this is not possible, you should make the best endeavours to send the written offer through as soon as possible after your conversation with the vendor.
Read the full decision here.
Purchasers’ confusion over the process
Multi-offer situations can be confusing for potential buyers, and REA continues to receive complaints and enquiries about multi-offers.
Complaints can arise because potential buyers have not understood the process correctly and feel they have been treated unfairly. It is important that you provide information about the multi-offer process, and make sure the potential buyer has understood this information.
There is also often confusion around timeframes in a multi-offer process, especially when the potential buyer thought they were the only party interested in a property. Potential buyers may be suspicious about competing last-minute interests in the property.
Another potential area for confusion is if an earlier offer has been declined by the vendor and there is now more than one buyer interested in the property. You need to clearly explain the multi-offer situation is a new sale process, and the potential buyer has the chance to submit a new offer that should be their best offer.
We encourage all agencies to have clearly documented policies and procedures for the process they will follow when a multi-offer situation arises. This will help you, and your agency have a consistent process and will enable you to provide clear information to both vendors and buyers about what process will be followed.
Firstly, the most important requirement is to ensure that all parties understand that they are participating in a multi-offer situation. Other multi-offer considerations for potential purchasers:
- being informed to put in their best and highest offer, because they may only have the one opportunity to do so
- being made aware that the vendor may choose to negotiate with one potential purchaser to the exclusion of others, or negotiate with all interested parties
- assuring buyers that no other purchasing party will be made aware of the nature or extent of their offer
- being made aware they can withdraw their offer or counter-offer at any time before acceptance (all parties should be advised of their rights regarding this).
In the event you receive a large number of offers, the process can become a public auction. All parties will need to be advised, and auction conditions may need to be prepared and presented at short notice.