The robust state of the property market in key hot spots, such as the Sunshine Coast, is pushing prices upwards, mainly driven by the strength of demand in relation to supply, leading to many sellers (and buyers) facing a multiple offer situation.
It is important that both parties – buyers and sellers, understand what the real estate agent’s obligations are in this scenario, within a legal and ethical context.
Agents have an obligation to immediately inform their seller clients of all offers, act in accordance with instructions from their seller clients and to obtain the maximum sale price for the property. However, in obtaining the maximum sale price for the property, agents must treat potential buyers honestly and fairly and not engage in misleading or deceptive conduct and/or unconscionable conduct. Conduct which may be considered misleading or deceptive and/or unconscionable can include, but is not limited to:
- an agent playing potential buyers off against each other in an attempt to draw out further offers and drive up the sale price; and
- an agent advising a buyer of the existence of a higher offer in circumstances where a higher offer does not exist, has lapsed, or has previously been rejected by the seller.
If either of these scenarios were investigated by the Office of Fair Trading following a complaint from a potential buyer, the agent has to produce evidence of the existence of the other potential buyers and higher offer.
If an agent receives multiple offers to purchase a particular property, the agent should inform the potential buyers that multiple offers have been received and obtain a written acknowledgement from the potential buyers that they have been advised of that fact.
This approach alerts the potential buyers to the existence of other offers and provides them with an opportunity to make an increased offer to purchase the property if they wish. In this situation, agents should ensure that no pressure is exerted on potential buyers to increase their offer as this may be considered to be high pressure tactics, harassment, or unconscionable conduct.
In circumstances where an agent has received multiple offers from potential buyers, before the seller has executed a written Contract of Sale, the agent should advise their seller client of the offers and discuss the following course of action as one method to handle a multiple offer scenario:
- Advise the potential buyers that the seller has received other offers before they have executed a written Contract of Sale. In disclosing the existence of further offers, agents should be mindful not to disclose any details of the offers to the other potential buyers;
- Approach the potential buyers and provide them with a timeframe within which to provide their best and final offer to purchase the property;
- The offers are to be sealed and then presented to the seller;
- If the agent has been instructed to advise the potential buyers to submit their best and final offer, it should be stressed to the seller that these offers should not be used as a means to commence further negotiations with the potential buyers; and
- A written acknowledgement should also be obtained from the potential buyers that they have been informed of the multiple offers.