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Writing an offer for a property can be exhilarating and stressful at the same time. It can be even more stressful when you are competing against other buyers for the property – and when you don’t fully understand the offer process.
There are some common misconceptions about making an offer to buy property, and about a seller’s obligations when they receive multiple offers.
To help make submitting your next offer less stressful, check out these three common myths, and what the facts actually are.
MYTH: A good strategy is to offer a set amount over the highest bid
When the value of an offer is based on a reference to a competing offer, it is called a referential offer. The purpose of a referential offer is for a buyer to piggyback on the highest offer which is acceptable to the seller.
REALITY: Referential offers are risky and could lead to litigation. The BC Court of Appeal held that an offer by one bidder which is dependent for its definition on the offers of others is invalid and unacceptable.
MYTH: You can put a clause in your offer to prevent a seller from sharing the amount of your bid with other buyers
In B.C., sellers have the right to instruct their agent to share information contained in one offer with a different buyer. This means that buyers may be able to learn how many bids have been received, and the highest price offered.
Some buyers have attempted to protect the information in their offers by including clauses prohibiting a seller from disclosing the information to another buyer.
REALITY:Sellers are not bound by the clauses in an offer unless they have accepted and signed the offer. So including a “don’t tell” clause won’t prevent a seller from sharing information about your offer.
MYTH: The highest offer is always the winning offer
If you’ve made an offer that wasn’t accepted and you find out that the property sold for less than what you offered, it doesn’t necessarily mean there was illegal or unethical conduct by the seller or their agent. There may have been terms or subject clauses in the successful offer that were more important to the seller. Maybe the closing date was better aligned with the sellers’ needs, or the seller felt that the financing terms for the buyer were more realistic.
REALITY: Sellers are never required to accept an offer, even if it is at full asking price. They can counter the offer, reject it, or simply decline to respond.
Talk with the agent representing you to understand how to draft an offer that is appropriate for your financial circumstances. Your agent can explain the seller’s obligations when considering which offer to accept.
BCFSA’s Practice Standards Advisors are available to answer questions about real estate transactions and the services to expect from a licensed real estate professional. Get in touch with us at [email protected].