The battle of the competing offers! “We are in multiple offers!” It’s a delight to the ears of the Seller and strikes fear in the heart of Buyer. We saw it in Toronto and Vancouver, where houses were being regularly sold for several thousand dollars over the list price. Right here in Ottawa we are experiencing a significant Sellers’ Market this season.
Finding and buying a home is emotional enough but the added pressure of competing for the home can send stress levels through the roof (pardon the pun – it was intended). The alternative is not great either – don’t compete and lose the house they love.
The following list is a good basic overview from both sides of the equation but being creative and knowing the ins and outs is paramount to winning:
1. Interact Objectively
Outline all the important details prior to hosting offers. By doing this, you are setting the stage for organized, consistent offers to be received by your Sellers. This can be done through email correspondence with all interested parties to ensure the communication is clear, concise and recorded. Place in everything from possession date preference, preferred deposit starting point, inclusions and exclusions, offer presentation information, etc. Then ensure to follow-up with the interested parties regularly as the presentation time nears. Clarity and integrity are paramount.
2. Offer Time
Be considerate of the irrevocable time, some agents will utilize this period to enter into conversations with bidders to see if there is room for improvement on their offers. This can benefit the Sellers ‘Best Interests’ but also weaken their position if done incorrectly. It’s a fine line and must be handled with professionalism, transparency and grace. Most of the time, it should be considered that the initial offer received is the Buyer’s ‘best foot forward’ in other words, they have come with their best offer as there may not be a second opportunity to better their initial offer once submitted.
3. Verbal Negotiations
Be warned to ensure that any and all communications that are done verbally are captured in writing. My rule of thumb is “If it’s verbal, it’s void”. Discussions can be quick, heated, under duress so understanding the environment for multiple offers is key to ensure all details are captured, proper positions are communicated and everything is in writing.
4. “I have another offer …”
Often encountered when a competing salesperson is trying to inspire a higher offer price or to get someone to submit an offer on their listing. The Real Estate Brokers Act (Bill 55), passed in July 2015, has ensured that such posturing has to be done ethically and with transparency. If indeed a second offer is received (or a first, depending on the scenario) the offer has to be in writing. Once again, “Verbal is Void”. Offers received by the Listing Brokerage need to be fully transparent, communicated properly and tracked in document storage for future reference to ensure compliancy. Ask your Realtor for full details on the process.
When approaching a multiple bid scenario, it’s essential to examine a variety of factors. No two circumstances will be identical and people have differing approaches and philosophies on the bidding scenario. It is important to keep your integrity and process clean to ensure you are achieving a ‘win win’ scenario for all involved.
5. Sellers Direction
Properties may hold off offers until a certain date and time in order to ensure appropriate time allowance for showings through the property. This enables momentum of emotion for buyers interest in the property. A key component in generating potential multiple offers.
The ‘Bully Offer’ can circumvent the offer presentation date and time depending on the contracted process with the Sellers’ Direction OREA Form 244. A Bully Offer is an aggressive favourable offer to the Sellers to consider their offer in a timeframe prior to the offer presentation date/time. The intention is that the offer is ‘so good’ the Sellers will consider it cancelling the ‘holding off’ time period to take advantage of this great offer versus entertaining any others. This is a precarious situation for the Listing Agent as full transparency, notification and communication needs to be fully carried out otherwise it can backfire on the Listing Agent and the Sellers. As always, honesty, integrity and full transparency is the correct path. If done correctly, and done with full transparency a Bully Offer can sometimes be a rewarding opportunity for the Sellers.
As a critically important decision-making factor, many people tend to focus on the purchase amount of the offer. While the purchase price is one of the most important factors it is not the only financial factor to consider. If you are trying to include some requirements for financing, a big deposit can hold value. The deposit amount is typically in line with the range of purchase price. For example, a $300,000 property deposit will differ from a $900,000 property. A large deposit can also give the Sellers the feeling that you are financially secure.
Timing, in anything, is critical. In preparing offers and communicating with Sellers using timing to build momentum is key. Two factors in creating wining momentum are the closing date and the expiration of the conditions (if any). Some Sellers may prefer a timely possession date versus the dollar. They might choose an extended closing for getting things in place for their next deal or build as there could be a domino effect on their side for costs incurred if dates are missed. Each scenario can be unique and it is important to ensure you are doing your due diligence of proper communication with the other party gathering all the facts of what is important to the Sellers. After all, we are attempting to make the offer ‘as attractive‘ as possible.
Sometimes certain chattels, if not included, can tip the scales in your favour. Sellers can have emotional attachment to certain items in the home. Or no emotional attachment at all. Having the conversation can uncover other items in the home that may be of importance. Take into consideration that the Sellers are moving somewhere and these items may be playing a factor on where they are going. Ultimately, it doesn’t hurt to ask.
The expiration time of the submitted offer can be used as a negotiation tactic. And, it also can be a major factor in timing the communication process. Pushing a Seller to respond quickly can end up backfiring for you, or can bring you ahead of the competition. It’s a fine line of push-pull on time and price. A long, irrevocable will give the Seller flexibility and time to work through their emotions. In some situations, it can be professional and courteous to provide sufficient time for offer reviews which can be appreciated by the Sellers. The additional time allowance can also provide the Sellers with the opportunity to match the deal and inspire other offers to the table. Until deciding your irrevocable timing approach, discuss the situation with your real estate agent in depth to explore all options. And know who you are negotiating against, meaning what type of negotiator role they fall into and just as important, what negotiator role you are playing.
5. Terms and Requirements
The power of your offer does not depend solely on price. Conditions can play a major role in protecting the Buyer allowing them the opportunity to inspect the property, secure all options for financing, etc. But it can also provide an escape opportunity for you the Buyer much to the dismay of the Seller. An offer with less or no conditions will be more attractive to the Seller. A clean offer can sometimes beat out a higher offer price with conditions. It depends on the Seller’s unique situation. Review all options with your Realtor. Often used are the standard OREA condition clauses but rarely used are limited conditions. These can be more attractive than the standard approach when professionally explained to the other party. Once again, consult your professional and ensure to choose wisely.
It is important to understand your current marketplace and what your best options are going into battle. I truly believe information is clarity + power. Be sure to consult your Realtor in your own marketplace, set your expectations and explore your options.