December 22nd - 2015

Multiple offers pose unique challenges

A multiple offer situation requires attention to detail and due diligence on a number of fronts, no matter where the property is located. The EDGE newsletter spoke to three REALTORS® in different cities about how they handle competing offers.

Man swamped by work

A multiple offer situation requires attention to detail and due diligence on a number of fronts, no matter where the property is located. The EDGE newsletter spoke to three REALTORS® in different cities about how they handle competing offers.

Man swamped by workMultiple offers are a fact of life in Toronto, but they are also familiar territory in Ontario’s other urban markets. REALTORS® from three Ontario cities share their insights on working in a competitive offer situation, whether they’re representing the seller or the buyer.

The REBBA code of ethics states clearly that you cannot disclose the contents of an offer in a competing offer situation to other buyers. You are required to disclose the number of competing offers to every person who is making a competing offer.

Ensure that your clients know and understand the risks and rewards of buying or selling so that they can make an informed decision about the transaction and any offer on the table.

Caution your clients that, even if they are pre-approved for a certain amount, if there are multiple offers, a bidding war can occur and they should be careful to make sure they are protected and don’t overextend themselves financially, the REALTORS® all advise.

"Sellers want to know a bit about the buyer, and it’s not always price that decides the outcome."

Presenting a client’s offer in person is the approach favored by Sara Hill, a Kitchener area Realtor. In situations where a multiple offer is involved, she believes that presenting her client’s offer in person rather than by email gives her an edge over the competition.

“I always try to paint a picture for the sellers of the kind of people my buyers are and how much they love the house,” says Hill. “I find that human contact is extremely important when you’re dealing with multiple offers.”

“Emotions are involved when people are buying and selling and I’ve had situations where the sellers said they took my buyers’ offer over others because they felt a connection,” said Hill.

“Sellers want to know a bit about the buyer, and it’s not always price that decides the outcome. I describe the buyer in terms that I feel are soft and warm for the sellers, and this approach may have an influence, but it’s not the only factor, since we don’t know what’s in a seller’s mind.”

For sellers, Hill says she helps them try to assess their property at market value so that they get a fair price in the end. “I tell them that they’ll never get multiple offers on an overpriced listing, and that brings them back to reality.”

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When working with buyers in a multiple offer situation, Hill reminds them that there will be a winner and a loser in terms of that property, so it’s important to draft their offer carefully and make sure that they remember how large a mortgage their pre-approval allows. 

“I tell them that there’s never, ever only one house for them,” Hill says. “If their offer doesn’t succeed, then it wasn’t meant to be. Other properties are always out there, so they have options.”

Jeremy Pilarski, a Toronto Realtor with 12 years’ experience, believes that presenting in person may give the client’s offer an edge, because it may result in the opportunity to present a revised offer.

“I want the sellers to like me and my buyers so much that they’ll give this offer a chance,” Pilarski says. “If the other offers are significantly higher, this won’t matter, but if the numbers are close, being there in person can give you an extra chance.”

He has seen buyers provide letters and photos to increase the appeal of their offer to the sellers. Once, when both parties were dog owners, the buyer wrapped up a dog bone to send along to the presentation. All other things being equal, these human touches can give your buyers an edge, he says.

Jack Lane, a London Realtor and former president of the London and St. Thomas Association of Realtors, has been in the business for 39 years. He says technology is changing the way offers are presented. He is often instructed by the seller’s REALTOR® to send his buyer’s offer by email, although he likes the face-to-face contact best.

"I believe that encouraging multiple offers is the best way for my sellers to achieve their goal."

“My preference is to present the offer in person, but that’s less common these days when the instructions are often otherwise,” Lane says.

Multiple Offer Mania

In Toronto, Pilarski bases his selling strategy on the expectation that the sellers will receive multiple offers. In recent years, that has often been the case. When he has represented sellers, about 60 per cent of his listings in the last few years have led to multiple offer situations, he estimates.

“I believe that encouraging multiple offers is the best way for my sellers to achieve their goal,” says Pilarski. A pre-set offer date can support this approach, he says. “The advantage for the seller is that the property is only on the market for about five days, usually from a Thursday to a Tuesday, so you can dictate the offer date.”

He advises sellers to look at the market value of comparable properties and list an asking price that is at least five per cent lower, with their consent. “With the pre-set offer date, I’ve found that potential buyers believe that the property will sell at a higher price than the listing so their bids tend to be higher than the list price,” he says. In his experience, this approach to pricing usually results in the seller getting multiple offers and ultimately receiving market value for their home or condo.

Making the Right Offer

When Lane comes across a property that he expects to result in a multiple offer situation, he advises buyers to act quickly. “I encourage the buyers to make the largest deposit they can, because it demonstrates their commitment and interest to the seller,” he says.

“This is where things like a pre-approved mortgage are important,” Lane says. “If you can go in without conditions, if you can get a home inspection done in advance and if you offer a desirable closing date, those strategies give you a good chance. Sometimes, you have to be creative to see if you can provide added benefits to the seller.”

Remember that your role is protect your clients, and submitting conditions on an offer can help to protect the buyer. If, after discussing it with their REALTOR®, a buyer chooses to submit an offer without conditions, make sure they understand the implications and risks in that. You as a REALTOR® should discuss with your buyers the risks of submitting an offer without conditions. Once they understand those risks, ask them to sign OREA Form 127 – Condition(s) in Offer – Acknowledgement. This form states that the client acknowledges and takes responsibility for the absence of specific conditions in the offer. You should also recommend that the buyers speak to their lawyer.

Hill tries to prevent buyers from getting too caught up in the emotion of the offer process. “I stop and say, ‘Here are the comparables, and the higher the bid you make on the price, the longer it will take you to start developing equity in a property. I try to bring the emotion back down. It lets me sleep at night, because I don’t want them to spend unnecessary dollars.”

Most important, says Lane, is to deal fairly with all parties in the transaction. “My policy and that of my company, has always been good communication and full disclosure, within the limitations set out in the Act.” 

Story by Elaine Smith.

Sources: Sara Hill, Jack Lane, Jeremy Pilarski.

Do’s and Don’ts of Multiple Offers:

Do:

  • Have a detailed office policy and review it regularly.
  • Advise your clients of their choices.
  • Advise your clients of the other party’s choices.
  • Tell other professionals the situation, in accordance with the Code of Ethics and your client’s instructions.
  • Keep copies of all offers and counter-offers.
  • Make notes of any discussions and decisions.

Don't:

  • Have your seller client sign back offers without careful attention to the conditions that may need to be inserted in each offer. Sellers only want to sell their house once!
  • Show favoritism to your own buyer clients or buyer clients in your own firm.
  • Renegotiate your commission without advising everyone involved.

Source: OREApedia, Ontario Real Estate Association. For details, visit: Multiple Offers


December EDGE

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Editorial Policy: The REALTOR® EDGE newsletter is produced 11 times a year by the Ontario Real Estate Association. The newsletter aims to provide practical and useful news and information about the real estate industry to members of the association. The opinions expressed in the newsletter are not necessarily those of the publisher. The newsletter welcomes submissions from the real estate community, including letters to the editor, opinion pieces, events and news. The newsletter reserves the right to edit, based on space restrictions and/or suitability, and/or to refuse submitted material for inclusion in the newsletter without reason. All rights reserved. Reproduction in whole or in part without the express written permission of the publisher, OREA, is prohibited. Contents are copyright of the Ontario Real Estate Association.

Editor: Mary Ann Gratton

Contributors to this issue: Elaine Smith, Merv Burgard.

Web Editor: Shade Lapite.

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