Pressure from multi-offer situations

Licensees will be well aware of the pressure a multi-offer situation brings to the table. It occurs when there is more than one offer in writing. In a multi-offer situation, the vendor can choose the offer that works best for them, from a number of offers.

Multi-offer situations must be carefully managed to ensure that everyone involved is on the same page. It can be tricky because of the number of parties involved, in combination with the fast-paced, high pressure environment that is generally associated with multi-offers.

It can be difficult for licensees to navigate their legal obligations in a multi-offer situation.

Issues with multi-offers

Complaints from purchasers or prospective purchasers have highlighted the following issues:

• Lack of clarity about how a multi-offer process is run

• Lack of communication about how a multi-offer situation arises

• Failure by the licensee to advise that there is another offer that may be acceptable to the vendor, and that there might, therefore, not be an opportunity to submit a higher offer

• Disclosure of the details of other competing offers to a prospective purchaser, who then assumes that their own price and terms are being conveyed to other prospective purchasers (i.e. a confidentiality breach).

Real Estate Agents Act (Professional Conduct and Client Care) Rules 2021 (Code of Conduct Rules)

The Code of Conduct Rules govern your conduct. Failure to comply with these Rules in a multi-offer situation could leave you with a finding of unsatisfactory conduct or misconduct.

Where a property is in high demand, the chances are that more than one buyer will make an offer on the same property. Given the temperature of the real estate market, and the shortage of housing stock, it is highly likely that this will be the case.

You must remember to ensure that you treat all parties fairly in a multi-offer situation and ensure that the process is transparent.

Rule 6.2

A licensee must act in good faith and deal fairly with all parties engaged in a transaction.

You must ensure that you are not placing any undue or unfair pressure on either party.

Rule 9.2

A licensee must not engage in any conduct that would put a prospective client, client or customer under undue or unfair pressure.

Another aspect which is crucial to managing multi-offers correctly, is communication. You must ensure that you keep the vendor updated with all offers and interest in the property from prospective purchasers.

Rule 9.3

A licensee must communicate regularly and in a timely manner and keep the client well informed of matters relevant to the client’s interest unless otherwise instructed by the client.

Implement a robust multi-offer policy

With the above issues in mind, an agency should develop and implement their own multi-offer policy, to ensure these situations are handled by all licensees within the agency in a compliant and consistent manner.

REINZ has a draft Multi-Offer Acknowledgement Form available for members on our Advisory pages, reflecting best practice.

Running a multi-offer process

Below are some practical suggestions for running a multi-offer process that deals fairly with all parties, and ensures all interest in the property is conveyed to the vendor in a timely, confidential manner:

• Licensees should ensure all interested parties understand they are participating in a multi-offer. Explain clearly your agency’s multi-offer process before asking the prospective purchaser to sign the acknowledgement form

• Take extra care if the prospective purchaser has difficulty understanding (e.g. if they are a first home buyer, or cannot understand English well)

• A purchaser can refuse to sign a multioffer acknowledgement form, or refuse to acknowledge that they are in a multi-offer situation. However, Rule 10.10 of the Rules requires that an offer is still presented to the vendor

• If your agency’s protocols, or the vendor’s instructions are to call for other interest once an offer is received, then explain this clearly to prospective purchasers at the outset

• Licensees need to ensure that the prospective purchaser understands they may only have one opportunity in terms of making their best offer, so their offer should be their ‘best and highest’ offer

• Prospective purchasers should be made aware that the vendor may choose to negotiate with one prospective purchaser to the exclusion of others, or negotiate with all interested parties

• Prospective purchasers still need to be made aware of their entitlement to legal and technical advice

• If a prospective purchaser submits an offer before a multi-offer process starts, you need to give them a chance to review it when the process becomes multi-offer

• Similarly, if the prospective purchaser is told that a sale is a multi-offer process, but this then changes to theirs being the only offer, you must tell them this and give them an opportunity to review their offer and submit a new offer if they wish

• Confidentiality is critical. No disclosure of any offers should be made to competing offerors. Licensees should assure prospective purchasers of the confidentiality of their offer

• A final close-off time for presentation of offers should be imposed (in agreement with the vendor). All written offers should be in a sealed envelope, and presented to the vendor at the same time

• A robust multi-offer policy should also address situations where a licensee within the agency, or a person related to that licensee, stands to benefit from the transaction. A senior independent person within the agency should run the process and supervise the presentation of the multiple offers

• Speak to your branch manager or supervisor if you have any concerns.

Remember, these situations could also trigger sections 134 or 136 of the Real Estate Agents Act 2008, which imposes additional disclosure requirements on licensees.

Melisa Beight

General Counsel, REINZ

Amesha Rama

In-house Lawyer, REINZ