When the market is getting hot, as it is now in Sydney and Melbourne, a sense of frenetic urgency creeps in. House hunting on weekends turns into a blood sport and for many it becomes a desperate time.
When you finally find a property that you can see yourself in for years to come, the one that ticks almost all the boxes, it can feel like fate has smiled on you. The agent is accommodating and seems more than happy to meet you on multiple occasions to open the home so you can make certain it’s the one for you and those you love.
You put in a written offer and wait confidently by the phone for the good news to be delivered.
The agent calls, but it’s not what you’d hoped for. In fact, it’s news that sends your heart plummeting through the floor – the owner has received another written offer and has given you an opportunity to counter-offer.
This can be devastating, particularly if you have been searching for quite some time and this property is one of the rare gems that you’ve fallen for.
For the inexperienced property buyer this can feel like a betrayal by the agent. It’s possible this agent has taken you through many properties and you’ve built a connection. How can they take a competing offer to the seller?
The agent works for the vendor
It’s important to understand from the outset that the sales agent does not have any responsibility to you, the buyer. The agent works for the seller. The agent’s role is to create interest among buyers and ensure that plenty of purchasers compete for the property, creating a multiple offer situation if possible.
In fact, the agent has a statutory obligation to garner the highest possible offer for their client, the seller.
How can you win in a multiple offer scenario?
When you find yourself in a multiple offer situation it’s important to understand that you will likely only get one shot at putting in another offer. Think carefully about the offer you want to make. And don’t be dis-heartened because it’s not always the highest offer that wins.
Ask the agent for the appropriate paperwork, usually called an Acknowledgement of Multiple Offers form.
For those who have an opportunity to be more flexible about the terms of their offer, this is the chance to shine. If you are one hundred per cent certain this is the house for you and you have done your due diligence, including building and pest inspections, then you can consider waiving the cooling off period. This sends a strong signal to the seller that you’re genuine, and they won’t have to worry about the contract falling over.
If the seller is in a hurry, offer to shorten the contract period, making the contract unconditional faster and saving the seller many weeks (or months) of tedious waiting.
If you have a significant cash amount at your disposal, make the deposit as large as you can safely afford. This tells the vendor you’re not hedging your bets and are fully committed to this house. This can be very appealing to a seller who may have been burned before by sale contracts falling over.
And if you want to reclaim some control over the situation, you can put the clock on your offer. Explain to the agent that the offer is only good for 24 or 48 hours. This will force them to act quickly and if you lose the house, you can be comforted by the situation not dragging on too long.
A Dutch auction is when the vendor is receiving multiple offers and the agent shares the amount of the offer with interested parties to allow them to outbid each other. It’s an ethically grey area for agents because of the lack of transparency for buyers, who have no way of knowing if the other bidders are genuine.
In most states, including Queensland, New South Wales and Victoria, there are strict laws that prevent agents from misleading buyers, however, the murky nature of the Dutch auction means it’s a situation best avoided. If the agent approaches you with a figure “to beat” you can choose to soldier on or let this property go.
My key advice here is to be certain, if you want to proceed, that you have an absolute line in the sand on price. Be firm with yourself– and communicate to the agent, once you reach that figure, you are not interested in further negotiation.
A final word on multiple offers
The low-interest environment means that the pressure on the market is likely to continue for some time to come. It’s more than likely that you will find yourself in a multiple offer situation, so take this opportunity now to prepare for it.
Could you put down a sizeable deposit, if you needed to? Could you waive any conditions to entice the seller? What do you need to do now in order to become a more attractive buyer to the vendor?
It’s worth putting in some early planning so you’re ready to pounce when the time comes.
The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.
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