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Guidelines for Multiple Offer Presentations
Multiple Offers require clear communication with all parties involved — Sellers, Buyers, and Real Estate Professionals. Obviously, not everyone can win in a Multiple Offer situation and no one is ever happy to lose a deal; however, the goal is to treat everyone fairly. The following are Guidelines for use in Multiple Offer situations:
A. HOW SHOULD A LISTING AGENT ADVISE OTHER AGENTS THAT THERE WILL BE MULTIPLE OFFERS?
1. First, notify all Selling Agents involved that Multiple Offers will be presented and ask if their Buyers would like to change or amend their Offers prior to presentation. It is important that you “bend over backwards” to be fair to all Agents involved.
REMEMBER: The Listing Agent has a fiduciary duty to assist the Seller to secure the best Purchase Contract (not just the best price). Unless the Seller and the Listing Agent have signed a separate Confidentiality Agreement prior to presentation of an Offer, the purchase price and other contract terms are not confidential and thus can be discussed with anyone at the discretion and with the permission of the Seller.
REMEMBER: REALTORS® cannot misrepresent any material facts to other REALTORS® or to Buyers. Listing Agents cannot represent that it is a Multiple Offer situation when that is not true; Listing Agents cannot claim that there are more Offers than actually exist. Listing Agents must be careful to accurately inform all Selling Agents about whether it is a Multiple Offer situation and, if circumstances regarding the number of Offers changes, that fact should be disclosed to the Selling Agent before their clients’ Offer is presented. It is safest not to state a specific number of Offers that are expected to be presented since that number can, and often does, change. It is best to just advise Selling agents that there may be more than one Offer and the Buyer should make their highest and best Offer.
2. Explain the procedures chosen by the Seller for presentation of the Offers to all Selling Agents in advance of presentation. Use words such as “the Seller would like. . .” — not “I” or “we”.
REMEMBER: It is the Seller who decides the procedures to be used in the presentation process, including whether to set a specific date and time for presentation of all Offers.
3. If there are any constraints regarding presenting Offers, such as the Seller
is unavailable until a certain date or the Seller has agreed to set a specific date and time for presenting all Offers, those constraints should be clearly specified in the Remarks Section of the MLS.
4. If the Seller wants to set up a specific date and time for presentation of all Offers, the Seller needs to be counseled as to the importance of adhering to those rules that have been established and specifically cautioned as to what to do if a Selling Agent and/or a Buyer wants to make an early or “Pre-Emptive Offer” (which is discussed below in Paragraph A-4c).
NOTE: It takes considerable time to properly change the rules regarding a set date for presentation of Offers once that date has been published in the MLS.
a. The best advice for a Seller if a presentation date has been set is to not allow any REALTOR® or Buyer to present their Offer earlier than the advertised date and time since to do so could be construed as favoring that REALTOR® or Buyer and acting unfairly to those who chose to abide by the advertised date and time. There generally is no real urgency to present most Offers.
b. If the Seller is following the advice in Paragraph A-4a, get written instructions from the Seller that no Offer may be presented before the advertised date so that a copy of that document can be given to any REALTOR® or Buyer requesting an earlier presentation. Without those written instructions, all Offers must be promptly presented to the Seller. However, even with written instructions from a Seller not to present any offers, if Listing Agent receives a Pre-Emptive Offer, the fact that the Offer has been received by Listing Agent must nonetheless be communicated to Seller.
c. If the Seller decides not to follow the advice in Paragraph A-4a and wants to see any or all Offers that are delivered prior to the date set, then the MLS remarks must be immediately changed to show that there is no set date for presentation of Offers; the Listing Agent must notify all parties who have expressed an interest in the Property that they do not have to wait until the set date. This is an extremely cumbersome process but it must be followed if the Seller is no longer following the advice in Paragraph A-4a.
5. If the Listing Agent also represents one of the Buyers, then the Branch Manager or Assistant Manager must be present to represent the Seller, and the Listing Agent should only attend the presentation of their Buyer’s Offer; preferably they should present first.
6. Ethically and legally, ALL OFFERS, even verbal ones, must be presented to the Seller, including those Offers that are received after acceptance of an Offer, unless the Seller has given the Listing Agent written instructions to the contrary. To make certain that Listing Agent has all Offers in hand, Listing Agent should keep the documents received well organized and continuously check e-mail messages right up to the time a Purchase Contract is ratified. EVEN IF AN E-MAIL MESSAGE HASN’T BEEN OPENED, AND IT CONTAINS AN OFFER, it is deemed to be received by the Listing Agent and thus must be presented to the Seller. So, Listing Agents should always check their e-mail for any late Offers just prior to presenting offers to Seller.
B. WHAT SHOULD THE LISTING AGENT ADVISE THE SELLER ABOUT THE MULTIPLE OFFER PROCESS?
1. Listing Agents should always discuss, advise and recommend options to the Seller. The Seller should be told that the final decision as to how to proceed should be made by the Seller.
2. If Buyers’ Agents ask to present their clients’ offers, Sellers should be encouraged to allow that practice. However, Buyers’ Agents can simply choose to send their clients’ Offers to the Listing Agent for the Listing Agent to present.
3. Listing Agents should refrain from insisting that all Offers be faxed or e-mailed to alleviate Selling Agents’ concerns about whether their Offer has been presented. However, if the Seller does not want to meet with the Buyers’ Agents, then the Seller should give written instructions to that effect.
4. Where the presentation occurs is important. Listing Agents should recommend using the Branch Office for presentation of Offers for the following reasons:
(a) The branch office has extra rooms for those Selling Agents and Buyers who want to attend the presentation of their Offer but need to be kept separate from the other Offerors;
(b) Appropriate forms such as Counter-Offers are more readily available;
(c) There are generally fewer distractions; and
(d) A copy machine and scanner is more readily available.
5. Listing Agents should recommend that the Seller refrain from discussing the contents of any of the Offers in the presence of any Selling Agents. Although Sellers can ask questions and seek clarification of terms, Sellers should not ask questions about the Buyer on any issues that relate to Fair Housing classifications.
C. WHAT ARE THE SELLER’S OPTIONS?
1. The Seller has several options when responding to Offers:
a. Accept one Offer and reject all other Offers (but see C-1b);
b. Reject all Offers – the best practice is to have the Seller reject the Offers in writing, such as by initialing the “Rejected” box at the end of most Offers;
c. Counter one Offer with a short time limit to respond and hold other Offers until an acceptance or rejection is received. If this method is used, be sure to watch the specified time limits contained in the Offers being held. Be aware that the various Purchase Agreement forms calculate the expiration date of the Offer differently;
d. Accept or Counter one Offer and place one or more of the other Offers in a back-up position by use of a Counter-Offer form that includes the CAR Back-up Offer Addendum (BUO Form or comparable local form). Back-up Offers should not be moved into primary position unless and until there is a fully-executed cancellation of the primary Offer.
e. Return all Offers without accepting any and inform the Selling Agents that their Buyers should submit their best Offer by a specific date and time;
f. Counter some or all Offers. If the Seller wants to use this technique, be sure to use CAR Seller Multiple Counter-Offer (SMCO Form or comparable local form).
NOTE: Consider not sending the exact same Counter-Offer to all Buyers. If more than one of the Buyers agrees to the same Counter-Offer, the Seller needs to be counseled to make a choice based upon the credit-worthiness of the
Buyers since using any other basis for choosing between Buyers may be construed as a violation of the Fair Housing laws. Alternatively, if more than one of the Buyers agrees to the same Counter-Offer, the Seller can consider another round of Counter-Offers.
2. Once the Seller knows the options in C-1, the Listing Agent should point out:
a. The Seller should not decide what course of action to take with respect to any particular Offer until after all Offers are reviewed.
b. The Seller should respond before expiration of the Offers or, if more time is needed, then get written extension(s) to respond to those Offers.
c. The List Price is not a cap nor is it an obligation to sell merely because a “full price” Offer has been made. Sellers can reject full-price Offers without owing a commission. Sellers can also counter Offers above list price.
d. If an Offer contains uncertain terms, such as Buyer will pay $X more than the best Offer (e.g., “Relative Bid” or “Sharp Bid”), the Seller should be advised that the California Courts have held that type of Offer is not enforceable. Seller has three options in responding to a Sharp Bid: (a) reject the Offer; (b) ask the Buyer to re-write their Offer with a set price; or (c) the Seller can counter the Offer specifying that “the price Offered, including the variable rate, is rejected; the Parties agree that the sales price is $X.”
e. If the Seller wishes to accept a back-up Offer, specific language is needed to advise the Buyer that they will not be moved into primary position until they receive written notification from the Seller that the first transaction was terminated, preferably by using the CAR Back-Up Addendum (BUO Form or comparable local form).
D. WHAT HAPPENS IF THE MULTIPLE OFFERS ARRIVE AFTER A SINGLE OFFER HAS BEEN COUNTERED?
1. If there is only one Offer which the Seller has countered (and thus a Multiple Counter-Offer Form was not used), and then you receive another Offer or Offers which your Seller wants to entertain, FIRST CANCEL/RESCIND THE FIRST COUNTER-OFFER IN WRITING. That is your most important task at that time. The cancellation/rescission can be sent via e-mail but that writing must be delivered to the Buyer’s agent before the Buyer’s acceptance of that Offer or Counter-Offer is delivered to the Listing Agent.
2. Once the outstanding single Counter-Offer has been properly terminated, the Seller can then deal with all Offers with all of the options in Section C above. Remember that Offers and Counter-Offers can be cancelled even though there is time remaining before they expire, but the cancellation/rescission needs to be in writing and delivered to the Buyer’s agent before the Buyer’s agent delivers the signed document to the Listing Agent.
3. If there is any question as to whether or not the outstanding Counter-Offer was properly terminated, the Seller should only accept another offer in a back-up position (See Paragraph C-1d above).
E. WHAT SHOULD THE SELLING AGENT DO?
1. Cardinal Rule: Never assume. Ask what procedures will be used by the Listing Agent and double check the answers before presenting. Consider asking:
a. Will all Offers be presented at the same time?
b. How many Offers are being presented and will you be advised if other Offers come in?
c. Does the Listing Agent represent one of the Buyers? If so, will the Broker/Branch Manager or some other agent be there to represent the Seller? If yes, there is no problem. If not, consult your Manager.
d. Are there any special benefits to the Seller, such as a reduced rate of commission, for agreeing to accept the Buyer working with the Listing Agent? If yes, you must advise your Buyer so that your Buyer knows what they are up against. Under MLS Rules and the Code of Ethics, variable commission rates must be disclosed in the MLS, but not all Listing Agents comply.
2. Notify your Buyer that Multiple Offers will be presented and explain the procedures that are to be used by the Listing Agent. Explain the various options that the Seller has in responding to Offers (see Paragraph C-1 above).
3. Strongly recommend that the Buyer be physically present/available to respond quickly to any Counter-Offer or if there is any change in the number of Offers.
4. Advise the Buyer that:
a. Sellers choose the Offer with the best overall terms, not just the highest price and the Seller is not obligated to accept or counter the Buyer’s Offer even if it is a “full price Offer”.
b. A Seller can hold the Buyer’s Offer pending review of other Offers or during negotiations of other Offers as long as the Buyer’s Offer has not expired.
c. The Buyer has the right to withdraw or revoke their Offer prior to receiving a written response from the Seller. This revocation can be done verbally but should be followed up with a written confirmation. Do not assume that the revocation is effective since it is possible that acceptance could have been perfected prior to revocation.
d. If the Buyer’s Offer is countered, the Buyer can accept, reject or counter the Counter-Offer. All three options are available, even if there are Multiple Counter-Offers.
e. If the Buyer is put in a back-up position, explain the rules in Paragraph C-2e.
f. No Buyer is obligated to wait until the date set in the MLS; the Buyer can request that the Listing Agent present their Offer before that date. There is nothing unethical or illegal about a “Pre-emptive Offer”. Selling Agents can suggest that their Buyers make a Pre-emptive Offer but they should also caution that it is strictly up to the Seller if the Seller will agree to make an exception to the date set for presentation of Offers.
5. Only represent one Buyer in a Multiple Offer situation; refer other Buyers to other agents who you are not related to and/or are not on the same team.
F. GENERAL POINTS TO REMEMBER IN ALL TRANSACTIONS
1. Principals must honor their contractual obligations and comply with all laws including but not limited to federal, state and local disclosure requirements. If they wish to avoid the contract in its entirety, or any of its terms, or not follow the law, they should be advised in writing to consult a qualified California real estate attorney.
2. Sales Agents should never give opinions regarding legal, tax or insurance issues nor make representations about possible or future use or development of any Property.
3. The principals should specify what their intentions are in writing. Oral promises in the sale of real Property are generally not enforceable. “Assurances” by third parties, such as roofers, contractors, or lenders, should be done in writing by that third party and not by the Sales Agent.
4. Summaries of key terms of Offers can be used to easily compare the various Offers and CAR has a Summary form for comparing Multiple Offers. However, Sellers must be cautioned that they should still review the entire Offer before it is accepted, rejected or countered because no Summary form can take the place of reviewing all terms and conditions of an Offer (including the “pre-printed” portions). In particular, look for check boxes as they can be easy to miss.
5. Remember — signing an Offer or Counter-Offer does not constitute Acceptance; Acceptance only occurs when the last signed, unchanged Offer or Counter Offer is delivered and personally received by the other principal or the designated agent who is authorized to receive it.
a. Therefore, it is not appropriate to tell a Buyer or Buyer’s agent when a Seller has signed the Buyer’s Offer or final Counter-Offer (“Congratulations, we have a deal” or, “The Seller has accepted your Offer/Counter-offer. We can open escrow.”)
b. Instead, if Listing Agents feel compelled to give Selling Agents any type of status update, state: “Seller is seriously considering your Offer. When it is signed, delivered and received by you, then there will be Acceptance.”
6. If a principal ignores or disregards advice given by the Sales Agent, that fact
should be confirmed in writing (e.g. an e-mail). Be specific as to the actual recommendations that have been made and the reason(s) why the principal is not following that advice.
7. Keep clients informed about everything in a timely fashion. Document all events and all communications by using and keeping all e-mails, which should be included in the Broker file at the end of the deal. The best means to prove what documents have been delivered is to use written receipts and/or cover letters that specify the creator of the document, the date of the document and the number of pages.