Building and maintaining trust is the cornerstone of any successful real estate transaction. Both buyers and sellers benefit immensely from an atmosphere of mutual respect and honesty. When a third-party offer is presented, it's more easily believed in a trust-filled environment. Trust fosters goodwill and smoother negotiations, making the path from offer to contract signing more seamless.
Learn more about the costs of buying a house, what are sealed bids when buying property, and making an offer on a house, and negotiating.
Can estate agents lie about other offers?
Agents will not lie, but they may not tell the whole truth.
An agent's words may fall into more of a grey area: they may say that the seller is considering other offers, where there might be none.
And they may tell you that the seller might soon announce that they are accepting sealed bids, to attract an offer from you quickly. (If you do find yourself facing a sealed bid situation where you feel you need to offer more than the asking price, then it's important to keep to the limit you've set yourself and not get carried away.)
But an agent will know there are repercussions of lying.
Why sellers value honest negotiations
Sellers will not wish to jeopardise a sale for the sake of getting a better price.
They are also likely to understand that trust forms the bedrock of any transaction.
A transparent process not only keeps potential buyers interested but also fosters goodwill, potentially securing a smoother sale.
Why do most agents avoid fabricating offers?
If a buyer or seller detects a lie, the agent risks both professional and legal repercussions. Most agents lean towards honesty for several reasons:
UK rules and regulations governing estate agent conduct: estate agents in the UK operate under a framework set by regulatory bodies. This framework establishes standards of practice that agents must follow, ensuring transparency and fairness in property transactions.
The Property Ombudsman's stance on deceitful offers: the Property Ombudsman holds estate agents to high standards of honesty and professional conduct. A direct violation, such as lying about another offer, breaches the code of practice. Agents found guilty of deceit face sanctions, including fines and, in severe cases, expulsion from the Ombudsman scheme.
Reputation: a good reputation in the real estate business is gold. Agents know that trust forms the foundation of their relationships with clients, and a single deceitful act can tarnish their name and drive clients away.
Professional risk: lying about an offer can lead to severe consequences and loss of business which can then take a long time to recover from.
Legal boundaries: UK regulations are clear about the expectations from estate agents. Misrepresenting the presence of an offer could land an agent in hot water, not just with professional bodies but legally as well.
Ethics and training: the estate agent training emphasizes ethical conduct. Many agents enter the profession with a genuine desire to help clients secure their dream homes or achieve the best sale price.
How can you verify the authenticity of a competing offer?
Buyers often face the challenge of determining the legitimacy of another offer on a property they desire. Here are several strategies to help you discern the reality of an offer and safeguard your interests.
Ask for written proof of the other offer
While it's perfectly legal for agents to inform potential buyers of competing offers, they cannot fabricate them. If you have doubts, it's reasonable to ask for written proof of the other offer. Although estate agents might not always be able to reveal the exact details due to data protection laws, they should be able to provide some form of documentation or redacted evidence that supports their claim.
However, be aware that seeing written proof does not always equate to absolute proof, as details could be concealed.
Speak directly to the seller's solicitor
You can liaise directly with the seller's solicitor. While they work for the seller and not the buyer, they can guide you roughly about what range your offer should fall into.
An honest conversation can help confirm the existence of another offer as well. Solicitors, bound by strict legal and professional codes, are less likely to lie.
Attend open houses
Smart buyers typically attend open houses to gauge the level of interest in a property. If these open houses draw significant attention, buyers should anticipate facing multiple competing offers.
But a large number of people, should not discourage you because most of them may be only window shopping.
Gauge the market conditions to determine plausibility
The housing market's ebb and flow offers insights into the likelihood of multiple offers on a single property. In a hot market, where nearly every detached home is a sought-after commodity, multiple offers are common. However, in a more stagnant market, a sudden surge of interest in a property might raise eyebrows.
Check the listing's number of days
If a property lingers on the market with ongoing viewings, there may be no competing offers. Even if there are, they might be weak, or buyers may not be well qualified. For a strong buyer, this could mean a chance to secure their dream home without competing bids.
Use data points to assess market value
Collecting data points is an effective way to measure the market value of properties. Research similar properties in the area, noting their list price, final sale price, and how long they've been on the market. This information helps you understand whether a competing offer aligns with the current market conditions or seems out of place.
What does the property price tell you?
When a property is priced exceptionally well, buyers anticipate multiple offers. Sometimes, a broker's strategy involves slightly underpricing to stimulate a higher volume of bids.
Conversely, if a property is overpriced, it's likely to attract less attention.
If a property's price is reduced during its listing period, it indicates a lack of current bids. However, a price reduction could spark renewed interest and more bids, which is exactly what might have been planned.
When investigating potential competing bids, rely on intuition and observe these indicators.
Lockout agreements and their role in the buying process
Lockout agreements grant potential buyers exclusive negotiation rights for a predetermined period. By preventing sellers from engaging with other potential buyers during this time, the buyer has a window to secure the property without competition.
A lockout agreement is a legally binding arrangement. Under the agreement, the seller pledges not to negotiate the sale of the property with any other party for an agreed period. This ensures the buyer has the exclusive right to pursue the purchase.
Benefits of a lockout agreement for buyers
Buyers often appreciate lockout agreements as they can remove the pressure of a competing offer while they perform necessary due diligence. This includes actions like surveying the property, ensuring finances are in place, and potentially securing a mortgage. Such an agreement can provide buyers peace of mind, knowing they won't be outbid while they complete these tasks.
Drawbacks of using lockout agreements for sellers
However, for sellers, this exclusivity can pose risks. If the potential buyer decides not to proceed, the property has been off the market. It has been missing out on other interested parties. This can cause delays in selling and may even impact the final sale price.
Non-refundable deposit agreements
In non-refundable deposit agreements, the buyers place a sum of money down to secure a property. Unlike standard deposits, should the buyer back out, they do not get this money back.
Risk-benefit analysis of deposit agreements
In a risk-benefit assessment-based approach, a non-refundable deposit can be advantageous for sellers. It serves as a commitment from the buyer, showing their genuine interest in purchasing. If the buyer defaults, the seller retains the deposit.
However, for buyers, this comes with heightened risks. Depositing money without the certainty of buying, particularly if unforeseen challenges arise, can result in a financial loss.
Before entering such an agreement, buyers should consider factors like their financial stability, the property's positive features, and their overall commitment to the purchase.
For many, it's a fine balance between demonstrating intent and safeguarding their best interest.
How estate agents attract multiple offers
One common tactic which agents use, is to price a property slightly below its market value. This approach can draw in a multitude of potential buyers, creating a competitive atmosphere that can lead to an escalated sales price. It can generate buzz and interest.
This approach often brings more viewings and, subsequently, more offers. When multiple buyers express interest, it can push the price up as they compete against one another.
Estate agents understand that buyers searching at specific price points may discover the property and consider it a good deal, thereby increasing the chance of a bidding war.
Steps to take if suspecting dishonesty from an estate agent
Seek further details about the competing offer's terms
If you find yourself doubting an estate agent's claim of a competing offer, it's your right as a buyer to request more information. While you may not receive absolute proof due to data protection laws, an agent should be willing to provide a broad overview of the other offer. This might include details like whether it's a cash offer; if there are any conditions attached, or a general sense of how it compares to yours.
Talk with the listing agent
Talking with the listing agent can offer valuable insights about the seller's situation.
Engage them in conversation about the property's interest, the number of viewings it has had, or any feedback from other potential buyers. While this may not provide direct evidence of the competing offer's legitimacy, it can give you a feel for the overall market activity and demand for the property.
Questions to ask to determine if the other offer is real
The answers to the following questions can help you gauge the credibility of the other offer and if it poses a genuine threat to your own:
How long has the other buyer been looking for a property?
Have they sold their current home, or is it still on the market? How soon can they exchange contracts to ensure a quick sale?
Did the other offer come via another estate agent or directly from the buyer?
Has the other buyer carried out any surveys or valuations on the property?
Is their offer dependent on a mortgage agreement or terms of a mortgage lender?
Is it a cash buyer; are they chain-free?
If you are convinced of deception, report the agent to the Property Ombudsman
If you become convinced that an agent has fabricated an offer, you have the right to report them to the Property Ombudsman.
The Ombudsman will investigate your complaint and, if warranted, take appropriate action against the estate agent.
Defensive strategies against a possibly lying agent
Research the local housing market thoroughly
Familiarising yourself with the local housing market gives you a clear insight into property values and trends. When buyers searching a particular locality are well-versed in the market conditions, they can make informed decisions.
Resources such as property databases, recent sales reports, and public records help in gauging the pulse of the market.
With a solid understanding of price points and recent transactions, any claim from an estate agent can be viewed with an educated lens.
Identify positive features and current market conditions
Knowing what sets a property apart aids in the assessment of its value. Consider elements like location, amenities, or unique architectural features. Get to know your local property market.
On the other hand, current market conditions, like a surge in buyers searching or a dip in available properties, can influence price points.
By identifying these factors, you'll be better equipped to question a listing agent's claim if it sounds too good or too bad to be true.
Obtain valuations from multiple estate agents
Seeking a variety of opinions minimises the risk of falling for any inflated or deflated valuations. Different agents might have different price points for the same property, allowing for a comprehensive risk benefit assessment.
By having multiple inputs, you can gauge supply and demand and determine if a competing offer aligns with the current market.
Limit sharing your maximum price budget with agents
While it might seem counterintuitive, not revealing your full budget can be a strategic move. If estate agents understand your maximum price willingness, they might tailor their approach or information accordingly. By keeping your cards close, you ensure the agent plays a straightforward game, reducing the chances of an agent-fabricated offer.
In conclusion...
There are many benefits of open and clear communication between all parties. It is proof of intentions and prevents misunderstandings. When all parties – be it the seller, buyer, buyer's agent, or listing agent – converse openly, there's little room for doubt or suspicion. This transparency not only makes the real estate process efficient but also ensures everyone is in the best position for a fair deal. Remember, in the vast majority of cases, estate agents lie far less than people assume. Establishing an open channel for conversations with agents can lead to fruitful results.
FAQs
What is the likelihood that the agent is lying about offers?
It is rare for agents to fabricate and lie, for the sake of their reputations and legal repercussions. Having said that, you must always keep a close eye on the details surrounding the property listing.
Can I ask for proof of other offers on the property that I am interested in?
Yes, you can ask but you may not receive all the information due to privacy laws. The agent is bound by law not to concoct any offers or details around any other offers.
Can I ask for the exact offer amounts by others?
Yes, sometimes the seller may allow the agent to disclose the exact offer amounts by other interested parties, but it is not the norm.
How prevalent are phantom bids in the housing market?
While tales of fabricated offers circulate, gauging the exact prevalence proves challenging.
Can I reduce my initial offer?
Yes, occasionally it may happen that some issues have been highlighted in a survey of the property, after which the buyer can reduce the initial offer amount. Learn more about what to look for when buying a house.