How to Properly Deal with Competing Offers
November 24, 2016
A competing offer situation, when a seller receives more than one written offer on a property, creates unique circumstances for consumers and it is important for both buyers and sellers to understand how they can handle these situation.
Verbal Offers are Not Competing Offers
All offers be presented in writing. If a seller’s licensee is presented with a verbal offer, the seller must be told what was offered and the buyer’s licensee must be instructed to put the offer in writing in order to be considered.
Sellers & Competing Offers
In Nova Scotia, the decision to disclose the existence of competing offers to buyers is entirely up to the seller and is documented in clause 6 of the Form 200: Seller Brokerage Agreement and clause 8 of Form 201: Seller Designated Brokerage Agreement. Should the seller change their mind at any point while their brokerage agreement is in effect, their brokerage agreement must be amended.
NSAR members take note: in a competing offer situation, the MLS Rules and Regulations require the listing brokerage to disclose any remuneration reduction to all brokerages with competing offers.
Should the seller receive competing offers, the seller’s licensee should:
- inform the seller immediately;
- recommend the seller review each offer prior to making a decision;
- disclose the presence of competing offers to the buyers’ licensees if the seller agreed to do so, however, the content of the offers must remain confidential;
- attempt to have all offers presented to the seller in the same time frame. The seller can delay the presentation by providing written consent; and
- advise the seller of their options, such as:
- Accept one offer, reject all others;
- Counter one offer and set others aside pending the result;
- Reject all offers;
- Accept more than one offer with any offers after the first as back-up offers. Any back-up offers must remove the seller’s obligation from the first contract when moving on to the next through a condition included in the counter offer, such as “seller’s acceptance of this back-up offer is subject to the seller ceasing to be obligated in any way by [date] under the previously accepted purchase contract. This condition is for the sole benefit of the seller.”
Buyers & Competing Offers
The buyers’ licensee has a duty to disclose competing offers and any terms that are known to them, but ultimately buyers may not be made aware of competing offer situations; that decision is with the seller. If the seller does disclose that the buyer is in a competing offer situation, the buyer’s licensee should:
- immediately inform the buyer;
- advise the buyer of the seller’s options;
- ask to personally attend the offer presentations; and
- advise the buyer of their options, such as:
- increase the offer prior to presentation;
- leave the offer as it is;
- withdraw the offer; or
- reconsider the fixtures, chattels, terms and conditions of the offer prior to presentation and have these changes reflected in writing.
Tips for Buyers
Once the buyer is made aware that they are in a competing offer situation, they may want to reconsider a term or condition in effort to compel the seller. Price and home inspections are both examples of conditions that buyers could remove in effort to improve their offer. Doing so, however, increases the level of risk for the buyer.
What can the buyer realistically offer on the property? Is the property appropriately valued? Buyers should understand the long-term risks of increasing their offer price and what impact it could have on their household budget. Further, buyers should understand that increasing their purchase price above the asking price does not guarantee that their offer will be successful.
Buyers may be tempted to remove the home inspection condition in effort to present a more appealing offer to the seller, but there could be major risks involved in doing so. Property defects and repairs are an expensive reality in many older homes and foregoing the home inspection will prevent the buyer from having a clear understanding of the current state of the property. Buyers are recommended to use extreme caution when deciding to remove a home inspection clause for this purpose.