A multiple offer situation is one of the most misunderstood moments in a property transaction. Most sellers instinctively reach for the highest number.
The legal framework: What the agent must do
Under South African property law and the mandate held by the estate agent, every formal written offer received must be presented to the seller, regardless of the price. An agent is not permitted to withhold any offer. The seller retains the right to accept, counter, or decline any offer as they see fit, but they must be informed of all of them.
Morné Prinsloo, Residential Property Specialist RE/MAX Town and Country Roodepoort & Krugersdorp , says: "Where multiple offers are received simultaneously, I present them to the seller at the same time with a clear breakdown of each one. This is the only fair and transparent way to handle the situation. "My job in a multiple offer situation is to help the seller look past the headline figure and understand the full picture of each offer. The goal is the best outcome, not just the best number," he says.
What I Look at Beyond the Price
Once offers are on the table, I walk my seller through each one by examining the following:
- Suspensive conditions. An offer subject to bond approval and the sale of the buyer's existing home carries significantly more risk than a clean cash offer or a pre-approved buyer with no property to sell. The fewer the conditions, the lower the risk of the deal collapsing before registration.
- Bond pre-qualification. If a buyer has a pre-qualification letter from a bond originator that tells us their income, credit profile, and affordability have already been assessed. An unqualified buyer submitting a high offer creates uncertainty. The bond may come back declined, the bank valuation may come in below the purchase price, and the seller loses weeks of marketing time.
- Deposit size. A buyer who offers a 10 to 20 percent deposit signals financial strength. Banks take deposit size into account when assessing bond applications, and a larger deposit reduces the risk of a shortfall between the bank valuation and the purchase price. A buyer offering no deposit on a high purchase price is a less secure position than a buyer offering a meaningful deposit at a slightly lower price.
- Occupation date and flexibility. Sometimes a seller needs to be out by a specific date, or alternatively needs time to find their next property. An offer that accommodates the seller's timeline has real value beyond the rand amount.
- Cash versus financed. A cash offer eliminates bond approval risk entirely. In my market, cash offers are not common, but when they appear, they deserve careful consideration even if the price is marginally lower, because the certainty of transfer is far higher.
Advise agents can give to buyers
An offer to purchase is a legally binding document, and breaking the contract can incur significant financial penalties, including liability for the estate agency commission. Once the property is transferred into (a clients) name, they take full ownership. Needing to sell it soon after purchasing it might result in a financial shortfall due to the substantial upfront costs that would have incurred.
It is therefore vital that prospective buyers conduct thorough research and are certain about their decision before making an offer. Seeff provides some vital pointers, and by following these, buyers can make informed decisions and minimise the risk of buyer’s remorse when purchasing property.
Define your requirements. Start by clearly defining what you are looking for in a property and the maximum price you can pay. Ensure that you can afford the purchase price with the costs factored in, and that you are able to secure a home loan. Knowing your budget and requirements will allow you to search for properties with confidence.
Consider the reason for your purchase. If you are buying a property for personal use, the criteria may differ compared to if you are looking to invest in a rental property or second home. While you will consider your lifestyle needs for an own-use property, you will need to consider the financial case for a rental investment.
Focus on financial preparedness. Budget correctly to ensure you can comfortably afford the property. It is always best to buy below your means to avoid future financial difficulties, especially if you are a first-time buyer. If buying a fixer-upper, be prepared for renovation costs and potential challenges and delays.
Research the area and prices. You should start by checking out the area and evaluating the prices, especially if you are not familiar with the neighbourhood. Spend some time in the area to assess the traffic and other factors which might lead to regret. Travelling time or inconveniences can impact the quality of life and are important considerations.
Inspect the property. Always view the property yourself and conduct a thorough walk through before making an offer. A condition of property report should be available so that you can familiarise yourself with any issues. Check the plans and that renovations or additions are compliant.
Beware of deals too good to be true. If a property price seems too low, do thorough research to understand why. It might be a quick sale, but it could also indicate underlying issues with the property or area. Always deal with a credible real estate agent with a valid FFC (Fidelity Fund Certificate) to ensure that all is above board.
Dealing with regret. If you regret your purchase, but cannot sell the property, you could always consider alternatives such as renting it out. This might help manage the financial burden and make the best of the situation. After a period, you could then consider selling the property, or you might end up keeping it as an investment.
The 72-Hour Clause and Continuing to Market
Prinsloo further says that if a seller accepts an offer that is subject to suspensive conditions, such as a bond approval or the sale of the buyer's existing property, the seller has the option to include a 72-hour clause in the agreement. This clause allows the seller to continue marketing the property while the conditions are being fulfilled.
"If a second, stronger offer arrives during that period, the seller can notify the first buyer in writing that they have 72 hours to fulfil or waive their suspensive conditions. If the first buyer cannot comply within that period, the seller is free to accept the new offer. The 72-hour clause is a tool that protects the seller's position while still honouring the first buyer's right of first refusal.
"In my practice, I advise sellers to include this clause whenever an offer carries significant suspensive conditions. It costs the seller nothing and keeps their options open," he says.
How to present the comparison to sellers
Prinsloo says that h prepare a simple side-by-side breakdown of each offer covering: the purchase price, the conditions attached, the buyer's financial position, the deposit offered, the requested occupation date, and my assessment of the risk profile of each offer. "I then talk the seller through the realistic outcome of each scenario".
A seller who receives three offers might find that the middle offer, which is R30,000 lower than the highest, carries no suspensive conditions and comes with a pre-qualified buyer and a 10 percent deposit. In that scenario, the middle offer has a significantly higher probability of reaching registration. The R30,000 premium on the top offer means nothing if that deal collapses six weeks later and the seller has to restart the process.
"Under the mandate given to me, I am required to act in the best interest of the seller. That means giving honest advice about risk, not just congratulating them on the highest price. A seller who understands the full picture makes a better decision. And a better decision leads to a successful transfer, which is the only outcome that matters," he says.
Want all the latest property news and curated hot property listings sent directly to your inbox? Register for Property24’s Hot Properties, Lifestyle and Weekly Property Trends newsletters or follow us on Twitter, Instagram or Facebook.
