I'm taking an on-line course right now and the subject is Multiple Offers. Most of the material is familiar to me. I estimate I've been involved in over 250 multiple offers situations over the years. and while I haven't "seen it all", I've certainly witnessed a great deal.
This Sharp Bid term however is new to me. I've heard of it but never seen one at an offer presentation. According to the manual provided by the Ontario Real Estate Association College....
"A sharp bid is an offer that has a stated price and an additional clause stating that the buyer will purchase the property at a certain price over the highest offer.
An example is:
The buyer hereby agrees to pay Two Thousand Dollars ($2,000.00) more than the best offer presented to the seller. (Sometimes there is a "to a maximum selling price of $XXX,XXX" inserted here.)
The seller shall disclose to the buyer or buyer's agent the best offer and the buyer hereby agrees to forthwith alter this offer in accordance with this provision.
Certain dangers are associated with this practice and it is not one which is recommended. It's inclusion in this course is strictly as a caution to a listing salesperson who may be presented with one someday. This clause may be so vague that it is not a contract at all but merely an agreement to agree.
Another concern is whether the clause is so unfair and unusual that a court would find that the practice was a sharp practice and contrary to public policy and void. The legal question may depend on whether the seller agreed to that type of bidding in the listing and whether the practice was now "normal" in the marketplace.
There is a requirement for the buyer to see a copy of a competing offer. This may be viewed as a breach of the code of ethics as well as a contractural breach. Clause 3 of the Buyer Representation Agreement prohibits the buyer representative from disclosing the terms of a buyer's offer to any other buyer.
Did anyone tell the competing buyers that their offers would be disclosed to another buyer and their offers would be "shopped"?
One way to try and ensure that this does not happen is to insert a clause in the buyer's offer such as the following:
This offer is to be presented only to the seller and the listing salesperson. It is not to be disclosed to or viewed by competing buyers or their representative.
There are other practical considerations as well:
If the sharp bid offer was the highest one, does the buyer have to increase it?
What is being matched?
Is it just the price or are the closing date, conditions, etc., also important?
What does “forthwith” mean and how long does the buyer have to alter the offer while competing buyers wait?
What happens if there are several offers with similar clauses?
How is it decided which offer is “higher”?
In competing offer situations, it’s better to tell a buyer to make their best offer and live with the results."
