Perhaps no situation routinely faced by REALTORS can be more frustrating, fraught with potential for misunderstanding and missed opportunity, and without a perfect solution than presenting and negotiating multiple offers on the same property. Consider the competing dynamics:
- Listing brokers are charged with helping sellers get the highest price and the most favorable terms for their property.
- Buyers’ brokers help their clients purchase property at the lowest price and on favorable terms. Balanced against the Code of Ethic’s mandate of honesty, it is imperative to refrain from making disclosures that may not, in the final analysis, be in the client’s best interests.
Will disclosing the existence of one offer make a second potential purchaser more likely to sign a full price offer –or to pursue a different opportunity?
Be aware of your duties to the other parties described both in the Code of Ethics and in license law.
7 KEY POINTS:
- The decision about how to handle offers will be presented and negotiated are made by the Seller, not by the listing broker.
- The decision about how counter-offers will be presented and negotiated is made by the Buyer, not the buyer’s agent.
- At listing appointments, explain to sellers that receiving multiple competing offers is possible and explain the pros and cons of your disclosing that fact to others if it exists:
- Acceptance of the “best” offer, informing all potential purchasers that other offers are on the table and inviting then to make their best offer;
- Countering one offer while putting the others to the side;
- Countering one offer while rejecting the other offers.
- Remember and remind the seller that the decisions are theirs to make and not yours.
- Remember the Code of Ethics requirement (SOP 1-15) With seller’s approval, disclose the existence of offers.”
- Explain that your advice is just that and that your past experience cannot guarantee what a particular buyer will do.
- At the Buyer’s counseling session, explain the pluses and minuses of various negotiating strategies
- A low offer may result in the buyer purchasing the desired property below list price OR
- a higher offer to beat a competing offer might result in the buyer paying more than the seller might have taken
- Explain to buyers that sellers are not bound by the Code of Ethics and are not prohibiting from “shopping” offers.
- Much of the frustration that occurs in multiple offer situations results from cooperating brokers being unaware of the status of offers they have procured.
- Listing brokers should make reasonable efforts to keep cooperating brokers informed.
- Similarly, buyer brokers should make reasonable efforts to keep listing brokers informed about the status of counter-offers their seller clients have made.
- Realize that in multiple offer situations, only ONE offer will result in a sale and one (or more) potential buyers will be disappointed. Properly educating buyers to the process and prompt, ongoing, and open communication will enhance the likelihood that they feel they were treated fairly and honestly.
Be professional and use NAR’s Buyer’s and Seller’s Guide to Multiple Offer Negotiations in both listing presentations and buyer counseling sessions.