The last 12 months or so has been unique in the world of New Zealand real estate. A time when we have witnessed changes that most of us could not have foreseen. Record prices have been recorded in every town, city and province, the time taken to sell has reduced from months to days, or even hours in some cases and mortgage interest rates have been and are still at levels borrowers could only dream of in the past. Add to this scenario a market where demand has exceeded supply and we can begin to understand why buying a home is so competitive, prices have escalated, and million-dollar sales have become commonplace.
The explosive nature of the real estate marketplace has more often than not created a situation where homeowners are faced with more than one offer on their property. This competition tends to improve the outcome for the home seller but choosing the best offer can also be a difficult decision requiring guidance from the nominated listing agent. The position becomes easier when the parties are unknown to the vendor and the decision is made based solely on the content of the Sale and Purchase Agreement and personalities and personal preferences do not come into play.
When there are multiple offers on a property there can be more unhappy potential buyers at the end of the transaction than there are happy parties to the final agreement. Interested parties will often have invested in builders’ reports, valuations, solicitors’ fees and spent time and energy sourcing finance all in vain; this is unfortunate but unavoidable. Appreciating the importance of the role of an agent in these circumstances, Tommy’s has specific procedures that our agents are expected to follow when handling multiple offers. The Real Estate Authority (REA) also has this to say on the subject of multiple offers:
“Good communication is key to helping potential buyers navigate multi-offer situations. 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 most desirable and move on to negotiate if necessary. While an agent’s obligation is to the vendor, care must be taken to treat all parties fairly and ensure the process is transparent.
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. Agents should be telling 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 party 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.”
Tommy’s has a strict set of rules to ensure that multiple offers are handled professionally, ethically and in a manner that is fair to all parties. Firstly, as with all offers, we recommend that potential buyers seek legal advice, and we allow them sufficient time to do so. This is also a requirement of the REA so is not a discretionary action. In a multiple offer situation, an independent member of the Tommy’s management team becomes involved to offer advice and to ensure that agents with a financial interest in the transaction are supervised or replaced during the negotiation process.
During negotiations, dialogue in relation to the particular transaction is restricted to the agents directly involved to ensure confidentiality can be guaranteed to all parties or potential parties to the transaction. Buyers in a multi offer situation must sign a form of acknowledgement to indicate that they are aware of other competition and that they have had an opportunity to make their best possible offer.
During any property negotiations, it is the vendor or homeowner who makes the final decision to accept a particular offer or to counter sign at a higher price. While the listing agent may have some influence over the vendor and certainly has an obligation to give advice, it should be understood that the final decision rightly rests with the homeowner.
Tommy’s has a simple set formular for deciding which offer to recommend which is:
- Preference is given to cash or unconditional offers.
- Title searches of one day are treated as though it was a cash offer.
- Conditional offers are treated the same, i.e. if one offer has 2 conditions and another has 4, they are given the same weight and the focus reverts to the price being offered.
In negotiations, “Cash is King” and an unconditional offer will, in most instances, take precedence over one that contains conditions. However, in achieving an unconditional status, we do not recommend that buyers take unnecessary risks in the heat of negotiations. Seek legal advice and advice from your Tommy’s agent and act accordingly.