Why is it possible for buyers and sellers to fail to understand who represents each of them?

For buyers: Dealing with competing offers

In certain market conditions, consumers may find that more than one buyer is interested in a property.

This is a competing offer situation and creates unique conditions in a real estate transaction. Both sellers and buyers need to consider how to respond when presented with a competing offer situation. Working closely with your real estate broker or salesperson will ensure that you understand the process.

In Ontario, the seller’s real estate broker or salesperson is required to disclose the number of competing offers to all buyers who have submitted a written offer. However, the terms and conditions of each offer are confidential to the seller and their broker or salesperson.

Working with a real estate broker or salesperson

The seller’s real estate broker or salesperson represents the interests of the seller in the transaction. The decisions about how offers are presented and responded to, as well as which offer is accepted, are made by the seller.

The buyer’s real estate broker or salesperson represents the interests of the buyer in the transaction. The buyer makes the final decisions related to their offer, including the important decision of whether or not they want to participate in a competing offer situation.

In some situations, the real estate broker or salesperson will represent the interests of both seller and buyer or multiple buyers. Consumers should seek guidance from their real estate broker or salesperson if this situation arises.

Tips for buyers

In a competing offer situation, buyers may be tempted to offer more for the property than they planned to and/or remove conditions from offers that are intended to protect them.

Before participating in a competing offer situation, buyers should consider factors such as:

Offer price: How much can the buyer afford to offer for the property and how much is the property worth? A high offer could enhance the buyer’s chance of success. However, it may not be the best long-term financial decision for the buyer. A competing offer situation does not necessarily mean that a property will sell for more than the asking price. Similarly, an offer that meets or exceeds the asking price will not guarantee that a buyer’s offer is accepted.

Financing: Buyers should be aware that pre-qualifying for a mortgage does not safely eliminate the need for a financing condition in an offer.

Home inspection: In competing offer situations, it can be tempting not to include a clause in an offer that makes it conditional on a home inspection. While your offer might be more acceptable to the seller, you may later learn that there are property defects, required repairs or needed upgrades that you weren’t aware of. In some cases, this can be expensive in the short or long-term. Foregoing a home inspection is a significant risk that a buyer needs to carefully consider.

Tips for sellers

A seller facing competing offers has to consider how they want to deal with the situation. The seller can decide to: accept the best offer; negotiate with one buyer and reject all other offers; negotiate with one buyer and advise other buyers that their offers are being set aside while the seller negotiates; or reject all offers.

Even in a competing offer situation, buyers have other options and may choose not to continue to participate. A seller may attempt to negotiate only to find out that it was the best offer the buyer could present. In the meantime, other buyers have found new properties they are interested in.

The seller’s real estate broker or salesperson can provide advice and guidance, ensuring that the obligations and the options available are understood.

On this page:

• Real estate advertising and pricing must not be misleading and deceptive
• Property pricing
• Do your research on property prices
• Enforcing real estate pricing laws
• Video: Understanding property prices

Real estate advertising and pricing must not be misleading or deceptive

It is illegal for a seller or agent to misrepresent a property in any way when advertising or marketing that property, whether verbally or in writing.

However, when it comes to an advertised price, you should use it as a guide only – because it can change while the property is on the market.

Underquoting

It is illegal for an agent to advertise or advise you of a price that is less than:

• the seller's auction reserve price or asking price
• a price in a written offer already rejected by the seller on the basis it is too low, or
• the agent's current estimated selling price.

Agents must update the price information they provide to buyers if any of these things change during the sales campaign.

If an agent does not comply with the above, then they are engaging in underquoting.

When a property sells for more than the price for which it was initially advertised, this does not always mean that underquoting has taken place. Sometimes a property will sell for more than initially indicated. This can happen when a number of interested buyers compete against each other to buy a property, and in doing so push up the sale price of the property.

Please read through the information below to understand how property prices are set and how to report underquoting if you suspect it has occurred.

Report underquoting 

Property pricing

Agent’s price estimate for the seller

When a seller is first engaging an agent, they need to have discussions about price.

The seller does not need to make any decisions about price at this time, but the agent must provide a document to the seller called the agent's sales authority, which will contain the agent’s estimated selling price.

The agent’s estimated selling price must be reasonable and based on research into comparable properties. It will form the basis of information provided for potential buyers and may change while the property is on the market

Price information provided for buyers

When the property is on the market, the agent:

• may advertise a price or price range for the property
• must provide a selling price in the Statement of Information for the property.

If a property advertisement includes a price, it must be listed as a single figure or a range of up to 10 per cent. The price cannot use any qualifying words or symbols, such as 'from', 'offers above', or '+'.

The property must not be advertised at a price that is less than the agent's estimated selling price.

You can ask an agent to explain how they developed any price information they provide or advertise and if it has changed.

Statement of Information

It is a legal requirement for all residential properties advertised for sale in Victoria by an estate agent to have a Statement of Information. It contains important price information to assist home buyers. It is the first thing you should check once you have found a property you like.

It must include:

• a selling price or price range for the property of up to 10 percent
• details of the 3 most comparable property sales - including the address, date of sale, and sale price, if available
• the median house or unit price for the suburb.

You can get a Statement of Information:

• at the property's open for inspection
• by checking online advertising - agents often include it with the property listing as a 'Statement of Information' tab or a PDF you can download
• from the agent - they must give it to you within 2 business days of your request.

Seller's reserve or asking price

The lowest price a seller is prepared to accept for their property is called the:

• reserve price for an auction, or
• asking price for a private sale.

This price may be different from the agent’s estimated selling price for the property if the seller has chosen not to accept their agent’s advice on price.

A seller can choose not to tell their agent their asking or reserve price during the marketing campaign.

The seller's reserve price is usually set on the day of the auction. It may be higher than the advertised price.

If a seller tells the agent of their asking or reserve price during the marketing campaign, the agent cannot advertise the property below that price.

Do your research on property prices

• Research the market value of property in your preferred areas by searching the internet, attending auctions, speaking with a variety of estate agents and monitoring auction results. This will give you a realistic idea of the suburbs and types of properties you can afford. For more information and resources, view Property data
• Use any price that is advertised as a guide only. The agent represents the seller but must be fair and honest with buyers.
• Ask the agent to justify price information they provide. They should have knowledge of the market in the area to support their estimate.
• If no selling price is advertised, use the selling price and the 3 comparable property sales found in the Statement of Information as a price guide.
• The seller is unlikely to set their auction reserve price until the day of the auction. The reserve price decided on the day might be above the selling price that has been advertised.
• Do not allow emotion to cloud your judgment and be realistic about the price the property is likely to sell for.

Reporting underquoting

If you believe underquoting has occurred and want to report it to Consumer Affairs Victoria, you will need to provide the following information:

• property address
• your contact details
• details of the real estate agent
• screen shots of the property advertisement
• Statement of Information
• written representations made about the property (if relevant)
• explain the problem - for example, why you think the property advertising is misleading
• any other documents that you think may help us.

We do not respond to every report we receive, but we keep all information for our intelligence purposes and use it to inform our compliance and enforcement activities.

Report underquoting

Enforcing real estate pricing laws

We regularly inspect real estate agencies and conduct reviews of agency documentation to ensure estate agents are complying with the law.

We use a range of compliance tools against agents who underquote, including warning letters, enforceable undertakings, injunctions and prosecutions.

The action we take depends on the impact on a buyer and the seriousness of the breach. Our focus is to help consumers who are at most risk of harm and to act on issues that have the potential to cause widespread detriment to Victorians.

For more information, view our Regulatory approach and compliance policy.

Video: Understanding property prices

Why should a buyer have representation quizlet?

Which of the following refers to the individual who is represented by an agent?

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