Can someone place a higher bid after the registration deadline has passed?
What does “under offer” mean in relation to the written offer requirement, and why is a real estate agent so important in this context?
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Can you still be outbid after the closing period has expired? This guest blog explains what “underbid” means, the role of the written offer requirement, and how this affects you as a buyer. Buying or selling a home is one of the most important life decisions, one that most people make only two or three times in their lives. Due to increased legislation, regulatory pressure, and interference from various parties (including lawmakers, associations, and representatives of interest groups, politicians, and the media), buying or selling a home has only become more complicated.
A verbal agreement is not legally binding
The written form requirement stipulates that the purchase of a home by a buyer must always be recorded in writing and must also be signed by the seller. Verbal agreements, emails, text messages, or other forms of communication are therefore not sufficient on their own to legally compel either party to fulfill their obligations. As long as the purchase agreement has not yet been signed by both parties, both the seller and the buyer may still withdraw from the transaction.
Bid and written requirement
Throughout the entire buying or selling process, there are a few moments that can be particularly nerve-wracking and confusing. One of these is the stage when a home is “under offer.” In this blog, we’ll explain these two terms. Suppose you’re interested in a home you’ve viewed and you hear from the listing agent that the home is “under offer.” What does that mean? “Under offer” means that someone has made an offer on the home that the seller is considering. Under the legal requirement for written documentation, you still have every opportunity to submit an offer as well, as long as no purchase agreement has been signed by the buyer and seller.
Even if the seller has agreed verbally (see box), that seller may still accept another offer as long as no purchase agreement has been signed by the buyer and the seller. After all, according to the written form requirement, there is no legally binding agreement until the buyer and seller have signed the document. The seller is then still free to feel unbound by a verbal agreement and to enter into a deal with a third party who makes a better offer before the purchase agreement is signed. Intuitively, this naturally goes against moral standards and values. After all, a verbal agreement is still an agreement: “We did agree on that, didn’t we?” one might think. However, the legislature has not sought to repeal the written agreement requirement legislation from 2003 to the present.
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An Explanation of the Written Requirement
On September 1, 2003, the legal requirement for a written agreement when a private individual purchases a home was introduced in the Netherlands. Since then, Article 7:2 of the Civil Code has stipulated that the purchase of residential real estate by a private buyer must be entered into in writing. Verbal agreement is therefore not sufficient to establish a valid purchase agreement.
Key points:
This applies when the buyer is a natural person who is not acting in the course of a trade or business.
The agreement is not finalized until both parties have signed the deed of sale.
The three-day statutory cooling-off period begins as soon as the buyer receives a copy of the signed purchase agreement.
The regulation was introduced by the Act of June 5, 2003, supplementing the regulations governing the sale of real property (Bulletin of Acts and Decrees 2003, 238). The reason this legislation was enacted is to better protect private buyers from hasty verbal commitments made during the purchase of a home.
What do real estate agents see happening in practice?
When demanding and establishing regulations, the media, politicians, lawmakers, and others often overlook practical realities and their consequences. The emotional toll that prospective buyers may face as a result of the undoubtedly well-intentioned laws and regulations regarding the written requirement is enormous.
Example: The emotions behind an offer
After viewing 16 homes and making offers on them, Angela (not her real name) has finally been told that she has made the best offer, which the seller is willing to accept.
Please note: the best offer isn’t always the highest one! The seller, who owns the property, decides who to work with to sell their home. This could be someone who made a lower offer but has the seller’s favor.
Overjoyed, Angela calls all her friends and family and is ecstatic that she can finally buy a home. Then, the listing agent calls her the next day to say that a higher offer has come in, even though it’s after the so-called bidding period has ended. And that the seller wants to proceed with that offer. The role the listing agent has in delivering this news to Angela is far from pleasant and triggers a flood of emotions. But the seller tells the listing agent that she doesn’t earn that higher offer—say, €5,000 more—every day, and while she feels bad for Angela, she still thinks that higher offer is too much money to “pass up.”
As expected, Angela is furious, and in such cases, the selling agent is often blamed. It is therefore not uncommon for a prospective buyer who finds themselves in this situation to sue the agent in the appropriate courts. And this is despite the fact that the selling agent, even if he or she wanted to, cannot do anything about it. In addition, the selling agent is obligated to pass on the higher offer to his or her client/seller.
It is not the real estate agent, but the legislature—which allows the seller the flexibility to enter into a transaction with third parties even after a bidding process and a verbal agreement—that could alleviate the aforementioned frustration and additional emotional distress felt by buyers. It can do so by repealing the legal requirement for a written agreement.
The bid log and the written requirement
Many parties have spent time setting up and mandating the use of a bid log. The aim is to ensure transparency in the bidding process, so that it can be determined afterward whether everyone had an equal opportunity to bid. After Vastgoed Nederland, Vereniging Eigen Huis, and the Ministry of the Interior had established the requirements for the use of a bid log—an idea originally proposed by Vastgoed Nederland—the NVM decided not to go along with it. NVM thought the concept of a bid log was fine, but believes that the proposed regulations went too far with regard to the seller’s freedom; after all, the seller is the owner and should be able to decide for themselves to whom they sell.
As a result, not all real estate agents who are members of a trade association use the same bid log. Real estate agents who are not members of a trade association are not required to use a bid log at all.
There is nothing wrong with transparency in the purchasing process. However, even this regulation requiring a bid log lacks effectiveness in practice due to the same legal requirement for written documentation mentioned above. Here is an example to illustrate this:
A home is listed for sale, and “open house” events have been organized. Thirty prospective buyers have viewed the property, and the deadline for submitting a bid is 12:00 p.m. on Wednesday. Virtually everyone who wants to make an offer does so before that time. After 12:00 p.m., the selling agent consults with their client, and the candidate with the (according to the seller) best offer is selected to proceed with the deal.
At 5:00 p.m. that day, a buyer’s agent calls on behalf of his client, who has learned that another bidder has made the highest offer. The prospective buyer wants to raise his or her bid to exceed the amount offered by the current highest bidder. The listing agent is required to pass this information on to his selling client. In the vast majority of cases, the owner/seller then chooses to accept that higher bid, which is permissible under the written offer requirement.
Conclusion: A tremendous amount of work has been done, discussions have taken place, and costs have been incurred to establish a bid log, which, while it does provide transparency regarding the bidding process, offers no assurance to the party that emerges as the winner of the bidding process.
This is just one part of the buying and selling process. Navigating the jungle (or, if you will, the “scary forest”) of regulations and obligations can sometimes make it hard to see the forest for the trees. The rules and obligations established by lawmakers, professional organizations, politicians, and other stakeholders are, as mentioned, created with good intentions, but are sometimes completely detached from practical reality, resulting in an effect that is the opposite of what was intended.
Rules and tools (such as a bid log and a closing period) give buyers a sense of order and fairness, but the moment of signing remains decisive. That is why, despite transparency and procedures, you can still be outbid.
Real protection for a prospective buyer
It may seem simple for a private individual to buy or sell a home on their own, but it usually isn’t. Time and again, these “non-professionals” face unexpected, often financial, setbacks when something isn’t properly handled during the entire buying or selling process. People don’t go around advertising the fact that they’ve made mistakes due to their own lack of knowledge. The number of cases where this happens is therefore much higher than is commonly known. The same applies to buying a home. Things can go smoothly when you buy as a private individual, but these are life-changing decisions involving a huge amount of money, and if things go wrong, it can result in significant financial losses.
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Fortunately, we live in a free country, and as a seller or buyer, you have the freedom to choose whether to handle the buying or selling process on your own or to seek guidance from a professional. Given the magnitude of this life decision—both financially and emotionally—hiring a professional, such as a real estate agent, is, in my view, not an expense but a step toward a stress-free home purchase or sale. You also go to court with a professional (lawyer); so why wouldn’t you seek the help of a professional for the place where you spend a large part of your time every day and have to pay a huge amount of money for?
Politicians, lawmakers, and many media outlets believe that buyers should be protected when purchasing a home and are seeking even more rules and regulations to achieve this, while a buyer’s agent can alleviate all those concerns and uncertainties for a buyer. That agent truly protects the buyer and looks out for their interests from the home search through to the closing at the notary’s office. Unfortunately, the costs of a buyer’s agent (unlike those of a mortgage advisor) are not tax-deductible, even though a buyer’s agent is precisely the one who provides the protection most parties desire for a buyer when purchasing a home. Perhaps this is an idea for lawmakers and regulators to make the costs of that buyer’s agent tax-deductible and to allow these costs to be included in mortgage financing.
Buying or selling a home: how do you go about it?
Are you looking to buy or sell a home in Amsterdam and want to be sure you understand the legal aspects involved? An agent affiliated with the Amsterdam Real Estate Association (MVA) has in-depth knowledge of the written offer requirement, the bidding process, and the local market, and will represent your interests from the first viewing all the way to the notary. With us, you’ll find a reliable, certified MVA agent in your area.
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About this blogger
Rob van de Steege works at Van de Steege Real Estate Group. He is a Certified Real Estate Agent and recently celebrated his 40th anniversary in the profession. At the time, he was the youngest real estate agent to be certified. In addition, Rob serves on the board of the Amsterdam Real Estate Association (MVA) and actively participates in various MVA committees.
Do you have any questions for Rob regarding this article? Please contact his office.