Scott Newman
By Scott Newman
Real estate is back in 2012 in a big way. Many markets are seeing price increases in response to dwindling inventories as more and more buyers are getting off the fence every day. With that in mind — especially since it’s been so long since we’ve had the opportunity to use the phrase “multiple offer” — I felt it would be pertinent and relevant to go through some best practices for handling multiple offer situations to make sure you’re in line with ethical and fair business practices.
Don’t Forget Your Loyalties: This is a big one, and it’s obvious, but many agents forget that you can’t disclose information that your client doesn’t authorize. No where is it written that you must disclose whether or not you have other offers on the table. Unless your seller has specifically directed you to do so, you should not automatically answer that question if asked by a buyer’s agent or buyer.
I have seen situations where a buyer will pull out of a deal because they think there is too much competition, and you can be legally liable for any negative consequence that results from your disclosing information you shouldn’t have.
To summarize, don’t ever forget that your ultimate loyalties lie with your seller, and just because you’re asked a question doesn’t mean you have to answer.
Treat Everyone the Same: This is another obvious one, but it’s important and bears repeating. To avoid accusations, legal action, and overall negative impact to your reputation as a professional, it’s imperative that you treat everyone the same way.
If you’re sending out a request for highest and best, send the exact same e-mail, forms, etc., to all interested parties who have seen the property so there is absolutely no doubt that everyone was informed of the status and had a chance to make an offer if they wanted. It’s better to e-mail an agent that showed the place six months ago along with everyone else, than it is to have your deal blown up by a lawsuit from a buyer who feels they were unfairly kept from knowing the latest update and opportunity to place an offer.
Keep Unbelievably Good Records: This is a great general piece of advice for all REALTORS®, but in the current market — where multiple offers are commonplace again — it’s essential.
My office handles a lot of REO and short sales that have always, and continue to, generate an extraordinary amount of offers. We routinely have deals where we get 15 offers, which means that 14 buyers and their agent are ultimately upset, and may be prone to making complaints about how the process was handled.
Be prepared for this and be proactive. Keep an accurate log of the date and time each offer came in, and make sure to create a strong paper trail whereby you confirm receipt of all offers as they come in and immediately forwarded them to your client for review. If you’re going to list a property, you’re going to deal with an upset buyer and their agent at some point. It’s imperative that you get organized now, so if you’re accused of not handling a file correctly, you have ample evidence to help defend yourself.
Nothing makes me happier than seeing some normalcy return to the real estate market, but as with all change it brings with it new responsibilities and concerns. Stay ahead of the pack by learning how to successfully deal with multiple offer situations. You will find that the lack of headaches and benefit to your reputation will be well worth the effort.
Scott Newman is the broker-owner of Newman Realty in Chicago. Connect with Scott at www.newmanknowschicago.com or @newmanrealty.
Comments 11
Hi Scott! Really enjoyed your article and I learned something that was very valuable in regards to responsibility to seller.
Would it be possible to address ‘multiple offers’ written simulltaneously to different agents on different properties and the property procedure for canceliing those not needed after one has been accepted. Thanks
The other side of the story as far as the Bank Owned Properties, Buyer’s have to sign a Multi-Offer form to have their Offer submitted.
Not so in NJ. If asked you must answer!!! Just asked that question at our ethics training when dealing with multiple offers!
Code of Ethics and Standards of Practice
of the NATIONAL ASSOCIATION OF REALTORS®
Effective January 1, 2012
• Standard of Practice 1-15
REALTORS®, in response to inquiries from buyers or cooperating
brokers shall, with the sellers’ approval, disclose the existence of
offers on the property. Where disclosure is authorized, REALTORS®
shall also disclose, if asked, whether offers were obtained by the
listing licensee, another licensee in the listing firm, or by a
cooperating broker. (Adopted 1/03, Amended 1/09)
Standard of Practice 3-6
REALTORS® shall disclose the existence of accepted offers, including
offers with unresolved contingencies, to any broker seeking
cooperation. (Adopted 5/86, Amended 1/04)
It should be disclosed if multiple offers are on the table. If you don’t tell a prospective buyer there are other offers, he thinks he has the only offer, what do you tell him if his is not accepted. To keep it straight, I think all that you know, with approval of the seller should be disclosed.
Quite honestly, I think that it would be in everybody’s best interest if all offers on REO’s were submitted electronically directly to the assiset manager to avoid any/all improprieties that are currently taking place.
And, like it or not, they are taking place and no action is being taken regarding the antics of listing agents–at least in central Michigan.
I was just in a highest and best situation (I was representing the buyer) and we had 24 hours to deliver our highest and best, which we complied with.
It was then more than 4 days and we still did not hear anything from the listing agent.
On the 5th day I received a message that the seller was going with the other offer. The listing agent allowed the competing buyer (buyer 2) to do a home inspection on the property, even though it was 4 days after the highest and best was due.
The owners made their decision immediately after buyer 2 did the home inspection.
Is this a correct way to handle a “highest and best” situation?
Great thoughts. I can see different situations where not telling that you have other offers would be benificial to the seller, but it could hurt them too. The clause that says “with the sellers authorization” is key. I’d get that in writing, even if only by e-mail. Lay out ahead of time how you will proceed if this happens.
I had a situation where I had a cash buyer & there were multiple offers, we were ask for ‘highest & best” & went in with a figure higher than list that made sence. We were told we did not get it & figured someone else went higher, since we were cash. When it closed we saw it sold for about $2k less than our offer. I called the lister to see what the deal was & she just said the buyer was cash. I said so was mine. She more or less just said, woops, it happens some times. Really? How can you miss that?
Well,” isn’t that special” that the listing agent can only say “woops”. Is it possible that the winning offers mentioned in Craig and Dawns comments were “in house” transactions?
I represented the buyer on a large transaction 1+ million. We made offer and was countered. We countered back and were told by the listing agent seller agreed to the price but wanted some concessions on an agricultural lease and a sellers lease agreement. My client “verbally” agreed to changes. Listing agent then called and said sellers became aware of a prepayment penalty which they were now negotiating and they would agree to offer when negotiated. After 4 days of calling every day,finally listing agent said price would have to be increased by $28,000 for offer to be accepted. Called agent back within 20 minutes with buyer’s response that they would accept. Listing agent said we were too late and he now had an executed contract with another buyer whom he had brought to the table. Listing agent never indicated that another offer was on the table. What duties to the seller does the listing agent have to the seller and to the buyers agent in disclosing multiple offers were presented to the seller. I truly believe the listing agent did his seller a disservice by not allowing the buyer an opportunity to send in a highest and best offer. My client’s offer was a cash offer and the listing agent indicated the accepted offer was an offer contingent on financing. My client is considering legal action against the listing agent. Does he have a legal remedy and is their a potential ethics violation on the part of the listing agent. I understand if the seller instructed the listing agent not to allow disclosure of multiple offers, although I am highly skeptical this occured. Would appreciate any thoughts or suggestions.
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