Presenting and negotiating multiple offers can be fraught with the potential for misunderstanding and missed opportunities. Although there is not a single, standard approach to dealing with multiple offers, there are fundamental principles to guide REALTORS®. When first taking a listing, explain to sellers that receiving multiple, competing offers is a possibility.
Remember that the decisions about how offers will be presented, how offers will be negotiated, whether counter-offers will be made and ultimately which offer, if any, will be accepted, are made by the seller & buyer —not by the agent. Remember that the decisions are theirs to make—not yours, and that you are bound by their lawful and ethical instructions. Explain that your advice is just that and that your past experience cannot guarantee what a particular buyer or seller may do. (NAR Revised 5/01)
Explain the various ways multiple offers may be dealt with:
- sellers can simply accept the best offer received.
- sellers can inform all potential purchasers that multiple offers are on the table and invite all to make their best offer
- sellers can counter one offer and try to negotiate that deal while putting the others to the side;
- sellers can counter one offer and reject the other offers entirely
Explain the pluses and minuses of each approach:
- accepting the best offer could help the closing process move forward more quickly, but the seller will lose an opportunity in receiving an even better offer;
- asking for all best offers could increase the price the seller expected or it may encourage buyers not interested in a “bidding war” to pursue other other properties.
- you set the price when you countering one offer, but not all second buyers will give you the time to negotiate before pulling their offer off the table.
- when you reject offers entirely if they are weak or have unfavorable terms, remember that should anything happens with prevailing buyer, you might value this backup
Be aware of your duties to other parties—both as established in the Code of Ethics and in state law and regulation.
- You must protect and promote the interests of your clients, but that it does not relieve you of the obligation to treat all parties honestly. (from Article 1)
- When representing sellers or buyers, be mindful of Standard of Practice 1-6’s charge to “. . . submit offers and counter-offers objectively and as quickly as possible.”
- With the seller’s approval you may “…divulge the existence of offers on the property” consistent with Standard of Practice 1-15.
- In the standard Berkshire Exclusive Right to Sell, the seller gives you permission to disclose the existence of offers (but you should have had a conversation about it before doing so), but you cannot disclose “the price and other terms of any offer”, unless authorized by the SELLER in writing.
- While the Code of Ethics does not expressly mandate “fairness” (given its inherent subjectivity), remember that the Preamble has long noted that “. . . REALTOR® has come to connote competency, fairness, and high integrity. . . .” If a seller directs you to advise offerors about the existence of other purchase offers, fairness dictates that all offerors or their representatives be so informed.
- Article 3 calls on REALTORS® to “. . . cooperate with other brokers except when cooperation is not in the client’s best interest.” Implicit in cooperation is forthright sharing of information related to cooperative transactions and potential cooperative transactions. 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.
For buyer agents, you too should have a conversation with your clients about the possibility of multiple offers and the pluses and minuses of each approach to reacting to the seller’s counter.
Finally, please realize that in multiple offer situations only one offer will result in a sale and someone will be very disappointed that their offer was not accepted. While little can be done to assuage their disappointment, fair and honest treatment throughout the process; coupled with prompt, ongoing and open communication, will enhance the likelihood they will feel they were treated fairly and honestly. In this regard, “. . . REALTORS® can take no safer guide than that which has been handed down through the centuries, embodied in the Golden Rule, ‘Whatsoever ye would that others should do to you, do ye even so to them.’ ” (from the Preamble to the Code of Ethics).