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Presentation of Offers
While many real estate boards/associations have rules on this topic, which are similar to the following guidelines, real estate professionals are reminded that these are the minimum requirements. Board/association members should be familiar with their board’s/association’s procedures.
Attendance of Other Real estate professionals
Unless the client instructs the real estate professional otherwise, there is nothing wrong with having the selling real estate professional who introduced the offer attend with the listing real estate professional and allow that selling real estate professional to explain the offer to the seller. While there is no real requirement to do so, it seems that the listing real estate professional and seller have nothing to lose by this procedure and it ensures that the selling real estate professional, who has introduced the offer, has a full opportunity to make the presentation.
When more than one offer is being presented, the listing real estate professional will allow only the real estate professional(s) who introduced the offer being dealt with at the time to be present.
Multiple Offers — Presentation Procedures
If more than one written offer on a specific property is made before the seller has accepted an offer, all written offers must be presented to the seller. The only exception would be if the listing real estate professional has specific written instructions from the seller on the listing not to present particular types of offers. Unless otherwise instructed by the seller, the listing real estate professional should ensure that any other representative involved knows there will be competitive offers.
Real estate professionals should be aware that any written offers received prior to the Completion Date of an existing sale must be presented to the seller. If a seller wishes to consider a subsequent offer, the real estate professional should advise the seller to seek legal advice. This applies whenever the real estate professional acted as a seller’s agent in the first sale, and includes cases where the listing brokerage becomes aware of the possibility of a resale to a different buyer.
If the real estate professional acted as a buyer’s agent in the past sale, then he or she would not owe this fiduciary duty of disclosure to the seller but would be required to disclose any third-party interest to the first buyer.
Order of Presentation
If the listing real estate professional has more than one offer on a property ready to be presented, the first thing to do is to tell the seller how many offers may be presented so that there is no suggestion of accepting or countering an offer before all offers have been presented.
If there is any question about which offer should be presented first, the offers should be presented in the order in which they were received to avoid controversy. To minimize the significance of the order of presentation, the listing real estate professional should explain to the seller prior to the presentation of the first offer that there is a total of (so many) offers and they will be presented in the order in which they were received.
A real estate professional must always consider all expected agency obligations in offer presentations. An agent for the seller would be obligated to disclose that the buyer will pay more (if this is known to the agent). An agent for the buyer, or a limited dual agent, must not disclose that the buyer will pay more unless instructed to do so by the buyer.
After the seller has considered all of the offers, the listing real estate professional should advise the seller of the options available; i.e., the seller can reject them all, accept one, provide all buyers with the opportunity to submit new offers by a specific date with the understanding that there is a multiple offer situation, or counter-offer one of the offers. In discussing these options, the seller’s agent should discuss the relative merits and potential pitfalls of each.
Because countering more than one offer at a time is problematic and a potential source of lawsuits, BCFSA recommends that only one offer be countered at a time.
BCFSA advises that extreme care be taken when multiple offers over the listed price are received after short market exposure. In these situations, the seller may wish to consider refusing all the offers and inviting each of the potential buyers to submit a new offer. If this is considered, the seller should be made aware of the possibility that some or all of the potential buyers may not submit new offers.
In an environment of multiple offers, a listing agent might be presented with an offer containing what is generally referred to as a ‘‘referential purchase price clause’’ (RPPC). The RPPC is a means by which a buyer endeavours to establish a purchase price by reference to prices contained in competing offers. The thrust of the RPPC is for a buyer to piggyback on the next highest bona fide offer which is acceptable to the seller. Such a clause might read as follows:
The purchase price is $1,000 above the price offered in the nearest competing bona fide offer acceptable to the seller to a maximum price of $350,000. The seller agrees to provide a copy of such nearest competing offer on acceptance of this offer.
A 1985 House of Lords decision from the United Kingdom held that a referential offer is an offer which does not stand on its own and which is not understandable without reference to another bid. The House of Lords held that referential offers were invalid.
The B.C. Court of Appeal, in the case of The Bank of Nova Scotia and Yoshikuni Lumber, held that an offer by one bidder which is dependent for its definition on the offers of others is invalid and unacceptable, as being inconsistent with and potentially destructive of the very tendering process in which it is submitted.
Listing and Offers
When you are preparing, presenting and negotiating offers and counter-offers, follow these principles.
Guiding Principles for Offers and Counter-Offers
- Communicate early and often
- When you take a listing or begin working with a buyer, explain to the client how offers and counter-offers are handled. If competing offers are a possibility, discuss strategies.
- The licensee advises — the client decides
- The clients are the ultimate decision makers.
- A seller makes the decisions about how and when offers will be negotiated and if they will be accepted, rejected, ignored or countered.
- A potential buyer makes decisions about when his or her offer will be written. Based on the licensee’s advice and the buyer’s decision, the duration of the time the offer will be open for acceptance must be considered. A potential buyer can accept, reject, ignore or counter any counter-offers received from a seller.
- All offers and counter-offers must be presented to the seller and the potential buyer, as the case may be.
- Offers and counter-offers in writing
- Offers and counter-offers should be in writing to ensure that the terms, time frames and legal obligations of the parties are understood.
- Written counter-offers should include a specific time period for acceptance.
- Withdrawal of a written offer or counter-offer should be made in writing. It is critically important to have written evidence of the revocation.
- Disclosure of terms of offers and counter-offers
- A listing licensee may not disclose the terms of an offer or counter-offer from one potential buyer to another potential buyer without the prior consent, preferably in writing, of the seller.
- Some real estate boards may have bylaws that prohibit the disclosure of the price and terms of a competing offer.
- If the seller has agreed with a buyer to maintain the confidentiality of the price and terms of an offer, no information may be disclosed. A seller who is not bound by a confidentiality agreement with a buyer may decide that a better offer could be obtained by disclosing the terms. Should this occur, the listing licensee is obliged to follow the lawful instructions of the seller.
- Full-price offer does not obligate the seller to accept the offer
- Listing property for sale is an invitation from the seller for buyers to make offers. The seller is not obligated to sell the property even if a buyer makes a full price, unconditional offer.
- No priority to offers
- The first or highest offer made does not bind or otherwise limit the seller to act upon any offer before considering any other offers.
- Licensee communication
- Licensees should make reasonable efforts to keep cooperating salespersons informed, consistent with client’s instructions.
- Licensees are not lawyers
- Licensees should advise clients to seek legal advice regarding any questions about the legal status of an offer or contract.