By: Lyle Harlow, Kale Realty
While multiple offers are glamorized on reality television as something every seller’s agent dreams of, in the real world they are difficult to handle and can become a raging dumpster fire if handled incorrectly. In this era of limited supply, agents are facing more instances in which they are involved in advising clients on how to respond in the case of multiple offers. Here are a few tips and tricks from my personal experience on how to handle multiple offers.
WHAT SELLERS’ AGENTS NEED TO KNOW
My first managing broker had one rule for multiple offers: the seller makes the rules. The listing agent’s responsibility is to give the seller options. According to the National Association of REALTORS®’ guide to multiple offers, “Sellers have several ways to deal with multiple offers. Sellers can accept the ’best’ offer; they can inform all potential purchasers that other offers are on the table; they can counter one offer while putting the other offers to the side, awaiting a decision on the counter-offer; or they can counter one offer and reject the others.” They may call for all competing buyers to submit their best offers for consideration by a certain time. While the listing broker can offer suggestions and advice, decisions about how offers will be presented and handled are made by the seller, not by the listing broker.
It’s not required that the seller’s broker disclose the presence of multiple offers. In fact, from time to time, buyers who are informed that they are in a multiple offer situation will withdraw their offer to avoid competing against other buyers, so it may not be in the seller’s best interest to do so.
However, not disclosing doesn’t mean not communicating. According to NAR’s guide, “Frequently, frustration and misunderstanding results from cooperating brokers being unaware of the status of offers they have presented on behalf of their buyerclients. Listing brokers should make reasonable efforts to keep buyer-representatives up-to-date on the status of offers. Similarly, buyer-representatives should keep listing brokers informed about the status of counter-offers their seller-clients have made.”
WHAT BUYERS’ AGENTS NEED TO KNOW
Next, let’s talk about some common assumptions that aren’t necessarily true:
- An offer made by a buyer is confidential. Nope! Not the case. Offers are generally not confidential when received by the seller. In the absence of some sort of confidentiality agreement already signed by the parties, once you push send on your e-mail and the offer launches into cyber- space, the sellers — and with permission, their agent — can tell whomever, whatever they want to about any offers received. According to NAR, “While some REALTORS® may be reluctant to disclose terms of offers, even at the direction of their seller-clients, the Code of Ethics does not prohibit such disclosure.”
- The sellers’ broker has an obligation to disclose the presence of multiple offers. Or, not. Unless directed to do so by the seller, brokers have no obligation to disclose the presence of other offers. Additionally, the sellers may direct their agent to disclose the presence of multiple offers to one or more parties, but not all.
- The seller has to/should accept the highest offer. Once again, nope! Sellers do not have to accept the highest offer, the offer with an escalation clause or any other offer, for that matter. While Fair Housing laws could come into play here, for the purposes of wrapping this little article up we’ll assume that no discrimination exists.
- The seller has to call for best offers, because that’s what’s fair. Not true.
BREAK DOWN YOUR ESCALATION CLAUSES
Escalation clauses are one of the least understood tools in a REALTORS®’ toolkit. Despite what many people think, they are not illegal, unethical, immoral or some sort of real estate black magic. A buyer’s agent needs to be just as well-versed in explaining how escalation clauses work to sellers’ agents as they are for buyers.
I have a friend who always explains them in an e-mail introduction to his offer. He might say something like this: “Our offer for 123 Main St. is a two-part offer, with an escalation clause. The first part is our contract with an offer to pay $125,000 for the home. Should you receive a higher bona fide offer, we will pay $2,000 more than that offer, up to a maximum of $130,000.”
“WHAT’S THE BEST WAY TO DESCRIBE BEST OFFERS TO A CLIENT? I TAKE MY GUIDANCE FROM NAR, WHO EXPLAINS IT THIS WAY: “ IT’S THE PRICE BEYOND WHICH YOU WOULD NO LONGER BE SAD TO SEE SOMEONE ELSE LIVING IN THE HOUSE YOU WANT.”
TAKE CARE NOT TO OVER-PERFORM
Complex problems rarely have simple solutions — and multiple offers are very complex problems. Your job as a REALTOR® is to be a trusted advisor, a skilled negotiator and an expert facilitator. Part of that is knowing how to educate clients on what multiple offers are and aren’t, how to navigate those offers and how to help your clients through whatever the outcome may be. You are not a decision maker or an information gatekeeper. Keep emotions in check and don’t vent to your clients about what’s “fair.” Don’t tell. Ask, listen, advise and let the client make decisions. Be a calming influence, not an instigator.
CHECK OUT NAR’S GUIDE
The Buyers’ and Sellers’ Guide to Multiple Offer Negotiations, from which much of this advice is excerpted, is available on the NAR website and is a far more comprehensive guide to the subject than this short article. Store it on your desktop, and the next time you become involved in a multiple offer situation, start by asking your client to read it to prepare for the negotiation ahead.