What Happens in a Multi-Offer Situation?

The New Zealand property market is known for its competitiveness, especially when it comes to multi-offer situations.

It can be frustrating to miss out on a property when you were the first to make an offer.

At the moment we are seeing a lot of our first home buyers and even next home buyers getting into multi-offer situations so, in this week's update, we will explore everything you need to know about multi-offer situations so you can have a competitive edge and increase your chances of success.

What are Multi-Offer Situations?

Multi-offer situations are a result of high demand and limited supply in the property market.

When there is strong competition among buyers for a particular property, it increases the likelihood of multiple offers.

In a competitive property market, multiple buyers may express interest in a property simultaneously, leading to a multi-offer situation.?This occurs when more than one written offer is made on a property.

The purpose of a multi-offer process is to provide all interested buyers with a fair chance to submit their best offer for a property they want to purchase. It also allows the seller to evaluate multiple offers and choose the most attractive one.

How Does The Multi-Offer Process Work?

The specifics of a multi-offer process may vary from one real estate agency to another. Each agency should have a multi-offer policy you can read to become familiar with how they run their multi-offer process. If you have any concerns about a multi-offer process you are part of, you can ask to speak to the branch manager.

For the most part, certain key principles remain the same. First, there must be more than one offer in writing for a multi-offer process to be initiated. Some real estate agencies will hold on to the first offer they receive while they check for others, effectively resulting in a multi-offer process. This may feel unfair if your offer was first, but remember, the agent’s primary responsibility is to get the vendor (seller) the best outcome.

The vendor then has the discretion to accept, reject, or negotiate further with the offers received. The vendor can only choose one offer to accept or negotiate with. If they choose to reject all offers, then the property will continue to be marketed.

If the other buyers included in the multi-offer process pull out, leaving your offer as the only one, then the agent must inform you and give you the opportunity to review your offer and submit a new one if you want to.

?? It's important to note that a multi-offer process is not the same as an auction, where the highest bid automatically wins.

?? Tips for Buyers in Multi-Offer Situations

?? Be Prepared and Do Your Homework

Before making an offer in a multi-offer situation, it’s important to conduct thorough research on the property.

This includes obtaining necessary documents such as a LIM report, obtaining pre-approval from the bank, and conducting a property inspection if possible.

The more information you have about the property, the better equipped you will be to make an informed and attractive offer.

?? Try To Minimise Conditions in Your Offer

In a competitive multi-offer situation, it’s advantageous to have as few conditions as possible in your offer.

While it's important to protect your interests and do your due diligence, eliminating unnecessary conditions can make your offer more appealing to the vendor.

Ways to do this are by obtaining a pre-approval for finance beforehand, making sure the lender is happy with taking the property on as security (your mortgage adviser can take care of this for you), having your solicitor look over the LIM and title and conducting a property inspection before submitting your offer to reduce the need for these conditions.

So having these things lined up beforehand can help you immensely.

?? How Much Are You Prepared To Pay?

If you are prepared to pay a little more to secure the property, then you might be best to offer that from the get go, rather than finding you were pipped at the post by a higher offer when it’s too late.

Remember, the vendor can only choose one offer to accept or negotiate with, so by putting in your best offer at least you know you are giving it your best shot.

?? Write a Compelling Cover Letter

A Real Estate agent must not favour one offer over another, however, they are? allowed to provide the seller with advice and information about how the offers might benefit or disadvantage them.

So why not write a cover letter to go with your offer and stand out among the competition?

Use the cover letter to introduce yourself, express your genuine interest in the property, and highlight any personal connections or reasons why you are drawn to the property. Add a photo of yourselves too! This personal touch can create a positive impression on the seller and potentially increase your chances of success.

Sometimes its not all about the best price for vendors, they might be looking for a nice couple or family to take over their property.

Navigating multi-offer situations can be challenging, but understanding the dynamics and implementing effective strategies can increase your chances of success.

Doing your due diligence, minimising conditions, and effectively communicating your intentions can help you navigate multi-offer situations with confidence.

Remember to consult with your Mortgage Adviser to leverage our expertise and help you to make an informed decision.

Reach out if you need a hand!

Cheers,

Stephen

The opinions expressed in this article should not be taken as financial advice, or a recommendation of any financial product. Stephen Massey and Loan Market shall not be liable or responsible for any information, omissions, or errors present. I recommend seeking professional legal and/or mortgage advice for your own personal situation. My Disclosure Statement is available on my website.