After listing a property for sale, you receive an offer from a prospective buyer. Then, before you’re able to present the offer to your seller-client, a second and third offer arrive with all of the buyers and their agents impatiently waiting for answers.

While handling multiple offers requires more diplomacy than handling a single offer, from a business standpoint there is really little room for complaint here. You have an attractive listing, which has a good chance of selling quickly, and your marketing efforts are paying off, which should please the seller.

However, there is plenty of room for problems if you don’t handle the intense demand for your listing with diligence and fairness to all – your seller-client and the prospective purchasers.

Verbal Offers Are Not Competing Offers
All offers must be presented in writing. If a seller’s agent is presented with a verbal offer, the seller must be told what was offered and the buyer’s agent must be instructed to put the offer in writing in order to be considered.

Disclosure to the Buyer
In Nova Scotia, the decision to disclose the existence of competing offers to buyers is entirely up to the seller.

Should the seller receive competing offers, the seller’s agent 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’ agents 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.”

Representing Buyers
The buyer’s agent has a duty to disclose competing offers and any terms that are known to them, but ultimately buyers might not be made aware of competing offer situations; that decision rests with the seller. If the seller does disclose that the buyer is in a competing offer situation, the buyer’s agent 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 increase the offer price and/or reconsider a term or condition in effort to compel the seller. Financing and 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.

Price:
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 financials. Further, buyers should understand that increasing their purchase price above the asking price does not guarantee that their offer will be successful.

Property Inspection:
Buyers may be tempted to remove the inspection condition in an effort to present a more appealing offer to the seller, but there could be major risks involved in doing so. Property defects and major repairs are an expensive reality in many older buildings and foregoing the 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 an inspection clause for this purpose.

Financing Pre-approval:
If you don’t know exactly what you can afford, you may be looking out of your price range and wasting your time. You may also be looking below what you would have qualified for and not getting the right investment property for you.

If you start off by getting a pre-approval on the other hand, you can sort by price, identify the right neighbourhoods, and find your desired property much faster.

Offer & Acceptance:
There is no contract until all parties agree to its written terms, sign their names to express that agreement and communicate acceptance to the offering party. Until then, you have nothing more than a stack of offers – not a stack of contracts – any one of which could appeal to your seller-client. Do not advise a buyer or a buyer’s agent that the seller has accepted the buyer’s offer until the seller has signed the offer. A seller who orally expressed a willingness to accept an offer has not yet accepted the offer and has no legal obligation to do so. Thus, no contract has been formed.

The Back-up Offer:
When one offer is accepted, your client may be willing to negotiate another as a “back-up”. Of course, this would require agreement by the second buyer and would require special language indicating that the back-up contract has no legal standing unless and until the primary contract is terminated.

Only One Winner:
Unfortunately, in the case of multiple offers for one property, there will be those that lose. Someone will walk away disappointed for not having been able to buy their ideal property, but if everything is handled in an equitable manner, the seller should NOT be the losing party, but should walk away with a deal that is in their best interest.

James Dunnett is a Consultant in our Brokerage Division and has extensive experience in handling complex leasing and sales transactions. If you need help managing your leasing requirements, or are interested in purchasing or selling a commercial property, James will be happy to assist you through every step of the transaction. Contact him at (902) 429-1811 or .