No-Subject Offers, Valuation, Exposure

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No-Subject Offers, Valuation & Exposure

Recent issues of the Report from Council newsletter have included articles advising licensees on the expected standards for professional practice in situations that may arise during “hot markets” — such as the current real estate market in many areas of BC. We want to remind licensees of those professional standards, particularly in relation to no-subject offers and ensuring that properties receive adequate market exposure.

No-Subject Offers

Your buyer clients are so eager to see their offer on a property accepted, they’ve asked you to write an offer with no subject clauses before they’ve had an opportunity to perform the normal due diligence.

Hazard:
By not including subject clauses, your clients may have no opportunity to arrange for a home inspection, review a title search or strata documents, and confirm financing or insurance approvals. There may also be other material facts requiring investigation that subject clauses could address. Without having performed this due diligence, your clients may not be able to make an informed decision about their purchase. Even if this information is provided after the offer, your clients may not be able to use it to collapse the deal, should they wish to.

Guidelines:
Advise your clients that writing an offer with no subject clauses, without having performed their due diligence, could expose them to many potential risks. Ensure they understand that in moving forward without performing the normal due diligence they are accepting those risks. If your clients nevertheless choose to make an offer without subject clauses, you should promptly follow up with a written summary of the advice you have given and maintain a copy of that summary in your file.

Valuation and Market Exposure

Your clients have listed their property on MLS® (Realtor.ca) in order to obtain broad exposure, but before it appeared on MLS®, they accepted an offer. Now they are unhappy, feeling that they could have received more if they had waited until the property was fully exposed to the market.

Hazard:
When markets are rising quickly, property prices can be a moving target. If a property is sold without adequate exposure to the market (e.g. the listing published on MLS® and adequate time given for prospective buyers to view the property), the sellers may later regret having made a hasty decision.

Guidelines:
At the time of taking the listing provide the sellers with the most current information available on comparable sales and listings. Discuss the impact of the current market conditions, the sellers’ reasons for selling, and the strategy they’d like to take for marketing the property. Unless the sellers have instructed that no offers will be considered until a specific date, when an offer is received present it to the sellers promptly, discuss the terms, and advise the sellers if there is the potential for other offers, or other interest in the property. Remember that your duty is to always act in the sellers’ best interests.

Unless specifically asked by a seller to delay submission of listing information to the MLS, a licensee should never hold back the listing in the hope that they may be able to sell the property before others become aware it is available.