Can I Make Two Offers On Two Different Properties?

Believe it or not, I get this question from buyers all the time: “Can I make two offers, on two properties?” and that’s followed by some logic and/or reason as to why this makes perfect sense, in their mind.

In a more balanced market, where properties are listed without offer dates, and are freely available, there’s often a case where a buyer has two properties that he or she is interested in, and wants price to be the ultimate deciding factor.

But of course, there’s always the risk that somebody else swoops in and buys one of the two properties, or at least submits an offer on one, meaning the contemplating buyer would now be in competition if he or she followed suit.

Thus the question, “Can I make offers on both properties?”

The thinking is – the buyer will negotiate with both sellers, simultaneously, and see how both negotiations are going.  Ultimately if a satisfactory set of terms and conditions are reached with one of the two properties, then the buyer will proceed with that seller and listing, and kick the other to the curb.

Is this legal?

Is this ethical?

Is this something that a buyer should or could do?  And is it something that a buyer agent should or would condone?

My answer: it depends.

I know, I know, that’s a cop-out, but it really does depend on the scenario.

Many would argue that making two offers on two properties, with the intention of only buying one property, is “negotiating in bad faith.”

I would agree.

Except that when you consider just how much today’s Toronto buyers have to put up with in this market – rising prices, offer dates, multiple bid situations, artificially-low list prices, the speed of the market, et al, perhaps this is one case where the buyer greasing the wheels a little bit isn’t so bad.

If a buyer wants to employ this as a strategy, there’s nothing illegal about it, and nothing unethical in my honest opinion.  It might be in bad faith, but not everybody has faith in this market.

You might suggest, “David, you’re going against everything our parents taught us when we were five-years-old, by effectively telling us that ‘two wrongs do make a right,’ in this case.”

But so long as you don’t cross the finish line with two sellers, you’re going to be alright.

Because let’s remember that if you make two offers, and both are accepted – you’ve bought two properties!  There’s no doubting that.  And unless you intend to buy two properties, then this isn’t just bad faith; it’s an actual breach.

As a seller, you want to identify these situations early on, and try to avoid them.

I recall one situation at The Thompson Residences a few years back when I had a listing for a 1-bed, 1-bath unit.  A very similar-sized, similar-priced unit came onto the market two days after ours, and we knew we would be competing.  This wasn’t the condo market you know now, with offer dates, and multiple offers on just about everything.  This was a market where we had strategically over-priced just a wee bit, and hoped that the first buyer through would fall in love, and come in at list, or close to it.

A few days into the listing, a well-known, high-on-himself downtown agent called me and said, “I’m bringing you an offer.”

“Great,” I said, looking forward to it.

“But I need to make you aware,” he continued, “That we’re also making an offer on the other unit that’s for sale.”

I knew exactly where this was going.

But I figured I’d ask, in as non-condescending a way as possible, “Oh, is your client buying two condos?”

It was an honest question.  I mean, I knew because of who I was speaking to, that he would pull something like this.  But I wanted to make 100% certain, and use his response to see what kind of opportunity there was to actually work on a deal together.

“No, he’s buying ONE condo,” he said with a little authority, and a slight chuckle as though he wanted to convey that this was a buyer’s market, and he was in the driver’s seat.

Then he added, “We’re going to have a little reverse-bidding war.”

“Whoever goes the lowest,” he said, “Will get the deal.”

In my 14 years, and however long he’s been in the business, I’ve only ever had two interactions with this agent, which is very surprising.  He’s a “big name” agent, but also does a lot of business.  I wouldn’t say I like his business philosophy, or his general attitude in transactional dealings, but every agent is different.  It takes all kinds to make an industry like this one.  I just wouldn’t want to deal with somebody like this, in a situation like this.

And so we didn’t.

“What if both offers are accepted?” I asked him, just to see how far he was willing to take this.

“My client is buying ONE condo tonight,” he reiterated.

“I know,” I pressed a little, “But if, for some reason, both offers were accepted at the same time, during this reverse bidding war, would he follow through with both purchases?”

“No, he obviously wouldn’t,” he told me.

And there was the bad faith dealing that I knew was present, as though I needed more reason not to work with him.

I told him we really weren’t interested, he said something snide back about how many deals he does, who he knows, who knows him, how important he is, bla, bla, bla, and I just left it there.

We ended up selling the condo two days later for just under the list price, but that’s not really central to the story.

In the end, I’ll say that as much as I disliked the agent’s approach, I will admit that it was somewhat novel.  What did he have to lose?  What did the buyer have to lose?  And what if it actually worked, and this “reverse bidding war” happened?  That’s pretty innovative, I have to admit!

Aside from the price, my issue laid with the fact that he had no problem with the scenario where there were two completed Agreement of Purchase & Sale’s, and the buyer would breach the contract by not following through with the transaction.

So here’s a question for you: what would you do, if you ended up in a deal you wanted out of, if you had no valid reason for exiting the deal?

You won’t believe me if I tell you, and you won’t like this answer, but here goes.

Let’s say you purchase a property, conditional on something – inspection, financing, take your pick, and you decide the next morning that you changed your mind, and you want out.

If you simply say, “I want out, I’m not bringing the deposit cheque,” you’re in breach of contract, and you can be sued.

Even though the deal is conditional, and you know that you could get out of the deal by not waiving your condition, you still can’t just say, “I want out of this deal,” and tuck and run.

It reminds me of that Seinfeld episode, where Jerry buys a blazer from a floor salesperson that he doesn’t like, and then wants to return it – for spite.  He tells the manager, “I want to return this jacket,” and when the manager asks why, Jerry says, “For spite.  I want to spite the person who sold it to me.”  The manager tells Jerry that he can’t return the blazer for spite and that if there was something wrong with the garment, he could return it.  So Jerry says, “Okay, then, uh, um, I want to return it because it doesn’t fit.”  The manager then smiles and says, “But you already said ‘spite’.”

The analogy is there; I’m not sure if you’re seeing it or not.

And if you really do want out of a deal, and you want to do it legally, do you know what you have to do?

You have to produce the deposit cheque.

Yes, you get in deeper.

But you have to have faith in the process.

You bring the $30,000 certified cheque or bank draft to the listing brokerage, and they deposit it into their trust account.  Then when the deadline comes around, you simply don’t waive your condition, the deal falls through, and the deposit is returned to you – as per the verbiage in your condition in the APS.

As most of you should know, you don’t need to provide any proof that you can’t obtain satisfactory financing, found issues with the home inspection or condominium status certificate, etc.  You merely need to have the correct clause in your APS; one that specifies that “unless” you waive your condition, then the deal falls through.

Here’s an example:

This Offer is conditional upon the inspection of the subject property by a home inspector at the Buyer’s own expense, and the obtaining of a report satisfactory to the Buyer in the Buyer’s sole and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than 6:00 p.m. on second day, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. The Seller agrees to co-operate in providing access to the property for the purpose of this inspection. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller as aforesaid within the time period stated herein.

There’s a common misconception that a buyer needs to provide a copy of the inspection to the seller, or that the seller is permitted to remedy the issues.  That’s not the case if you’re using this clause.

So in the case of somebody who changes his or her mind, you can submit your deposit cheque, wait out the second business day, and then not waive your condition.  The deal falls through, and that’s that.

Your cheque is returned, and you’re out of the deal.

There’s no breach of contract.

The problem here, however, is that just about every buyer out there would say, “I want out of this deal, and you’re telling me that the way to do that is by giving them a cheque???”

Perhaps I can’t blame them.

Like I said, it’s all about faith.

Think about that exercise where you fall backwards with your eyes closed, knowing your partner will catch you.  Now imagine you’re averse to this, but you watched as every, single other couple performed this exercise in front of you, and you saw all of them fall and be caught.

You saw it, you know it, and yet you still don’t want to do it.

And that’s what happens when a buyer finds him or herself in a deal they don’t want to be part of, with a breach of contract staring down at them.

So back to our situation where a buyer is making two offers on two properties, with the intention of only buying one.

If those offers were both conditional, and both were accepted, then the buyer could take the steps above, and get out of one deal.  They’d have to submit two deposits (and I know most of you are shaking your head at this idea, but I assure you that any lawyer will agree – it’s the only way to avoid breach), but it would legalize their actions.

Now, if both the offers were unconditional, and both were accepted, then there’s no way to avoid the breach, unless you buy two properties.

In the case of my Thompson Residences experience, the listing agent was going to submit two unconditional offers.  With the prospect of being legally bound two both properties not bothering him at all, this is why I determined it wasn’t a transaction I wanted to proceed with.

So if any of you buyers out there are wondering whether you can make two offers on two properties, when you only want to buy one, remember that it’s possible, but you need to be very, very careful…