Whether you are buying or selling a property, it is a good idea to learn as much as you can about the different methods used in New Zealand.
One that confuses a lot of people is the multi-offer process, where all interested prospective buyers are encouraged to submit their best offer and the seller can choose whichever one looks most attractive.
This process is designed to give all potential buyers an equal shot.
The process is not like an auction where an agreement is automatically formed with a successful bidder. The seller is not obliged or required to accept any particular offer in this situation; they may accept one offer, reject all offers, or choose to negotiate further with one particular party.
The actual form that a multi-offer process takes can differ from agency to agency – it is not defined in law or set by the Real Estate Agents Authority (REAA).
A multi-offer process can only be described as such when there is more than one offer in writing – a real estate agent is not allowed to pretend that there are genuine competing offers if they do not exist.
Agents are expected to clearly explain the process and any relevant paperwork to all prospective buyers and sellers.
If you are unsure about anything, ask the agent to clarify it or seek advice from your lawyer. It is far better to do this at the beginning than face confusion and disappointment further down the track.
All the offers are presented fairly in this process and a real estate agent must not favour one over another. All prospective buyers should know that they need to put their very best offer on the table.
Some real estate agencies will hold on to the first offer they receive while they check for others, effectively creating a multi-offer process.
This may feel unfair if you think that your offer should ‘win’ because it was in first, but it is worth remembering that the agent is working for the seller. Their primary responsibility is to get the seller the best outcome, considering both price and any conditions from buyers such as settlement date or being subject to finance.
If as a prospective buyer, you are told that a sale is a multi-offer process but the situation later changes to a stand-alone offer, you must be told about this and get a chance to review your offer and submit a new one.
Optimising multiple offers
Do as much homework on a property as you can before making the offer so you minimise any risks. This is important for many reasons; not least because it may help you eliminate some conditions and help you determine what your ‘best’ offer will be.
When thinking about the offer, it is worth considering how you would feel you found out that a higher offer had been accepted ahead of yours. If you think you would be prepared to pay more, then it’s better to make that decision at the start than when it’s too late.
There is often confusion around timeframes in a multi-offer process, especially if a potential buyer thinks they are the only people who are interested. Talk to the real estate agent marketing the property to make sure you are clear about any deadlines and about the sale process as a whole.
Remember that the highest offer is not always the winner. If you were a seller, would you prefer a higher offer or one with fewer conditions? It’s impossible to guess what kind of offer will suit a seller’s particular circumstances, but it is a good idea to eliminate as many barriers to a swift and easy sale as you can.
Want to get in early? Include an expiry time on your offer. This kind of sunset clause means the agent must present it to the seller so they can consider it before it expires.
Kevin Lampen-Smith is Chief Executive, Real Estate Agents Authority based in Wellington. For independent advice on buying or selling property, check out www.reaa.govt.nz.