Holiday Closure

The OREA office will close for the holidays at 12 p.m. Tuesday, December 24th.  Normal business hours will resume on Thursday, January 2nd.  Happy Holidays!

Holiday Closure

The OREA office will close for the holidays at 12 p.m. Tuesday, December 24th.  Normal business hours will resume on Thursday, January 2nd.  Happy Holidays!

May 4th - 2011

Multiple choice, multiple opportunities: Helping your clients deal with multiple offers

In a seller’s market, multiple offers are common, but they can also happen in a balanced or buyer’s market.

In a seller’s market, multiple offers are common, but they can also happen in a balanced or buyer’s market. That’s why it’s important for REALTORS® to know how to present competing offers in a way that protects their clients and is also fair and professional for all involved.

Presenting multiple offers can be complicated, and the more you know, the smoother the transaction will go. The best guidance to get you through a multiple offer presentation can be found in the REBBA 2002 Code of Ethics and your brokerage’s office policy. Because multiple offer presentations are often part of heated, emotionally charged negotiations, sticking to these rules and guidelines will help you to avoid problems.

Another valuable tool for REALTORS® facing multiple offer situations is OREA’s standard form, Offer Presentation – Acknowledgement (Form 109). This form is designed to prove to the buyers that their offer was in fact presented in situations where the offer was not accepted or was not signed back. It can also be used to verify that a seller’s counter-offer has been presented to a buyer.

There are advantages and disadvantages to being in a multiple offer situation, which is why buyers and sellers need to be fully informed of the options, benefits and risks involved, as well as the brokerage’s policies on dealing with them. Clients should also be made aware of the options open to the other party to the transaction, so that they can make informed decisions about their own strategy.

Although multiple offers can be satisfying for the seller and the listing brokerage, there are risks involved. It’s a good idea to talk about the various options with your sellers during your initial listing presentation. Let them know your office policy on handling multiple offers and how the presentations will be handled. You’ll also want to ensure that your sellers understand what can go wrong in multiple offer situations.

For example, your sellers should be informed that if they accept one offer, the other buyers may walk away and set their sights on another property. If the accepted offer is conditional and the conditions are not met, there may be no transaction at all.

If your sellers counter an offer in any manner, the buyer may wait until the last minute before deciding whether or not to accept that counter-offer. If the sellers reject all offers and advise all buyers to reconsider their positions and bring their best offers at a specific time, some buyers may decide not to participate.

The sellers must avoid making more than one simultaneous counter-offer because several buyers may accept at the same time and this could result in competing contracts and potential lawsuits.

If you are representing buyers, be sure to make them aware of the volatility and nature of the current market so that they can decide on their negotiation strategy. Price may not be the only concern for the sellers and there may be other concessions that would make your buyers’ offer more attractive. For example, buyers may decide to arrange financing and property inspections in advance, forego chattels, make a higher-than-usual deposit or adjust the closing date.

Section 26 of the REBBA Code of Ethics applies specifically to multiple offers. If a brokerage that has a seller as a client receives competing written offers, the brokerage must disclose the number of competing written offers to every person making an offer, but it cannot disclose the content of those offers. This also applies to a brokerage with a seller as a customer, if part of the arrangement with the customer is for the brokerage to receive the offers.

Whether you are working with a buyer or a seller, as client or customer, and whether it’s a multiple offer situation or not, section 24 of the REBBA Code of Ethics contains many requirements. One such requirement is to convey any written offer, amendments, waivers, etc. to the client at the earliest practical opportunity regardless of the identity of the individual making the offer, the contents of the offer or the nature of any arrangements for commission or remuneration. This is all subject to the written direction of the client or arrangement with the customer.

Another important section of the REBBA Code to bear in mind at all times, but particularly in multiple offer situations, is section 25. This requires disclosure by a brokerage with a seller, whether that seller is a client or a customer, of any commission terms that could affect whether an offer to buy is accepted. For example, a listing salesperson may have offered the sellers a reduction in commission if the property is sold to one of the listing brokerage’s buyers. Disclosure of the existence and the terms of these types of agreements must be made to any other person making an offer at the earliest opportunity and before any offer is accepted.

To learn more about presenting multiple offers, OREA offers a course titled Multiple Offers: Risks and Rewards. Check it out in the Continuing Education section of www.orea.comor contact your real estate board for details on upcoming seminars.

Be sure to check out the OREApedia topic, Multiple Offers (Competing Offers) at www.orea.com in the Members Only section for more information. You can also look at “Legal Forum” to find answers to commonly-asked questions about multiple offers (under topic: Offers, subtopic: Multiple Offers). The OREA legal pamphlet titled Multiple Offer Presentations is also available online. Go to Legal Forum & Resources and click on Legal Pamphlets.

Do’s and don’ts of multiple offers
Enjoy the rewards of multiple offers and avoid the pitfalls by keeping the following in mind.

DO:

  • Have a detailed office policy and review it regularly
  • Advise your clients of their choices
  • Advise your clients of the other party’s choices
  • Tell other professionals the situation in accordance with the REBBA 2002 Code of Ethics and your client’s instructions
  • Keep copies of all offers and counter-offers
  • Make notes of any discussions and decisions

DON’T:

  • Have your seller client sign back offers without making sure that they have paid careful attention to the conditions that may need to be inserted into each offer (Sellers want to sell their house only once!)
  • Show favouritism to the buyer clients represented by your own brokerage
  • Renegotiate your commission without advising everyone involved.

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For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Senior Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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The trademarks REALTOR®, REALTORS®, and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.

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