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The Crusaders... John Reilly, Saul Klein, Mike Barnett
Presenting Multiple Offers-Maine

Maine Association of REALTORS®

MULTIPLE OFFER GUIDELINES

July 1997 - approved by MAR Board of Directors

In April 1985, the Maine Real Estate Commission issued guidelines to licensees on the proper handling of multiple offers. These guidelines were neither law, nor regulation, but were designed to assist licensees in their handling of multiple offers in a manner that would promote public confidence in the real estate industry and minimize the filing of complaints by anyone who felt that a multiple offer situation had been handled improperly. Those guidelines were updated in January of 1990. In mid-1996, the guidelines were withdrawn because the Maine Real Estate Commission felt they had not been reviewed and revised following the enactment of the 1994 new License Law and Commission Rules and Regulations regarding agency. What follows is an updating of the Multiple Offer guidelines taking into account the 1994 License Law and Commission Rules and Regulations ("license law").

PURPOSE:

The Maine Association of REALTORS® issues the following guidelines for handling multiple offers to promote awareness of licensees' duty to act at all times in the interests of their clients and to deal honestly with customers. These guidelines are neither law nor regulation but merely guidelines. Each multiple offer situation will require its own thoughtful application of the license law to client and customer interests in the transaction. Agents are encouraged to consult with their designated broker should questions of procedure arise.

INTRODUCTION:

An extremely important aspect of multiple offers is clear and consistent communication. This includes ensuring that a thorough discussion occurs between an agent and their respective client regarding: 1) what a multiple offer is, 2) the various circumstances surrounding their occurrence, and 3) the various options available to the client. In addition, it is important for agents and licensees to communicate with each other in a professional manner that is consistent with these guidelines. Many times, even when multiple offers have been handled and communicated properly, negative comments about fellow real estate professionals is damaging to the consumer’s image of the real estate profession as a whole. This leads to consumer distrust and questioning of real estate brokerage practices.

These guidelines seek to ensure the importance of agents communicating with their client or customer throughout the multiple offer process and avoiding substituting their judgment for the judgment and decision of the client or customer.

There are several ways to handle multiple offer situations properly; the decision on how a specific situation is handled should be made by the client, a decision that will most likely be made based on an agent's advice to and discussion with the client.

The first general issue is whether the seller will want to alert all prospective buyers that they are in a multiple offer situation, thereby creating a sense of urgency among buyers to encourage them to make their highest and best offer; or, alternatively, is the seller concerned that some buyers may not want to participate in a bidding contest and thereby drop away from the multiple offer situation.

It is anticipated that, in the vast majority of cases, the seller will want to alert all buyers to the fact that there is a multiple offer situation to create that sense of urgency. An agent who fails to advise the seller adequately of the various alternatives available may be in breach of their fiduciary duty to promote the seller's best interests.

The second general issue involves the buyer. Presumably a buyer writing an offer wants to keep the offer confidential so that the listing agent will not use the existence of the offer to stimulate offers from other interested buyers, thereby creating a multiple offer situation. It is anticipated that, in the vast majority of cases, the buyer will want to keep the existence of their offer, and the terms thereof, completely confidential. A buyer's agent who fails to advise the buyer adequately of the options available to protect confidentiality, and the options available to a seller in responding to offers, may be in breach of their fiduciary duty to promote and protect the buyer’s best interests.

LISTING AGENT DUTY TO SELLER CLIENTS:

Listing agents should have a discussion with their client about how the market works and the potential of multiple offers. At the time a written offer is received it should be communicated to the seller in a timely manner. At that point the Seller should be informed of any and all interest in theproperty of which the agent is aware.

Additional interest in the real estate from other prospective buyers such as a request for a showing, or a request for additional information, or a notice that an additional offer is or may be forthcoming, should not hold up presentation of an offer while waiting for another. However, in the event of a multiple offer situation, listing agents should discuss with their client:

1. The terms of each offer and how the terms affect the best interests of the seller.

2. Whether the buyers are aware of each other.

3. The options available for handling multiple offers and the procedures to be followed for each option. These options include:

a. Delaying acceptance or countering any offer until another anticipated offer is received. During the delay, however, the original offer may expire or be withdrawn.

b. Accepting one offer and thereby rejecting all others.

c. Countering one offer and rejecting all others.

d. Countering one offer and putting aside all others.

e. Instructing the listing agent to inform one or more buyers of the multiple offer situation and give one or more buyers the opportunity to submit their highest and best offer by a specific date at which time the seller will reconsider all offers.

f. Reject all offers.

The opportunity to alert all prospective buyers that they are in a multiple offer situation, thereby creating a sense of urgency among buyers to encourage them to make their highest and best offer.

The potential that during the counter offer process in a multiple offer situation, one or all of the buyers may withdraw their offers prior to the seller's acceptance, particularly when informed of a multiple offer situation.

Since the risk of buyers withdrawing their offers affects a seller, it is the seller's decision on how to proceed with multiple offers. In the absence of the seller's decision, a listing agent should not presume to notify buyers of the multiple offer situation because if so notifying the buyers results in one or more of them exiting the negotiations, the listing agent is at risk of having made a decision that turns out not to have been in the seller's best interests.

The listing agent should not substitute their judgment for the seller's judgment in the decision of which option to select, or whether to accept an offer or delay until an anticipated offer is submitted.

LISTING AGENT DUTY TO BUYER CUSTOMER:

The listing agent has a duty to treat the buyer agent and the buyer customer honestly. However, there is no duty on the part of a listing licensee to disclose the existence of multiple offers to buyers and/or buyers agents; in fact, the decision on whether or not to disclose this information rests solely with the seller. If the buyer or buyer agent asks if there are multiple offers the listing agent has two options:

1. Respond that they will inform their seller client of the buyer’s desire to know of additional interest by other buyers and or other offers; that the listing agent will communicate the seller’s response back to the buyer and/or buyer's agent as quickly as possible.

2. Respond "yes" to a question of additional interest and/or offers, only if the seller client has previously given explicit instructions to the listing agent that it is permissible to give this information to all buyers and/or buyer agents making general inquiries regarding the existence of additional offers, without first requesting said approval from the seller client.

In either case, the listing agent should never disclose any of the terms of an offer or contract, unless expressly agreed in writing by all parties to the offer or contract.

BUYER AGENT DUTY TO BUYER CLIENT:

The buyer agent should discuss with the buyer the potential for interest in listed property for sale by more than one buyer at the same time. The buyer agent should discuss the possibility of multiple offers and the manner in which the buyer wishes to have their offer communicated to the seller. The buyer should be made aware of the possibility of the existence of their offer being communicated to other potential buyers.

In terms of confidentiality, the buyer agent should advise the buyer on the procedures for handling confidentiality of an offer and review their options:

1. Present the offer to the listing agent and request that the existence of an offer remain confidential; explain there is no guarantee of confidentiality.

2. Request the seller to allow the buyer's agent to present the offer directly to the seller in presence of the listing agent; presentation only, not present during consideration of the offer.

3. Insert a contingency clause in the offer stipulating a breach of confidentiality regarding the existence or terms of the offer would automatically terminate the offer; NOTE: it is the Maine Association of Realtors® opinion that this type of contingency in an offer would not be binding on the seller or the seller's agent; should the seller or seller's agent make the fact of the offer known, to other buyers and/or buyer’s agents, the offer would simply be void and there is no guarantee of confidentiality for the buyer.

4. Advise the buyer to negotiate a preceding confidentiality agreement with the seller regarding the complete confidentiality of the existence and/or terms of any offers between the two parties; this should be signed by all parties prior to presentation of any offer.

The buyer agent needs to discuss the pros and cons of each option with the buyer, fully recognizing the difficulty of gaining offer acceptance from a seller with more stringent confidentiality constraints.

In the event of multiple offers, a buyer agent should advise the buyer of the options available to the seller for handling such a situation and the procedures that might be followed depending on how the seller decides to handle the situation. The alternative options are:

a. The seller may delay accepting or countering any offer until an additional anticipated offer is received. During the delay, however, the buyer may withdraw their original offer or it may expire.

b. The seller may accept one offer and thereby reject all others.

c. The seller may counter one offer and reject all others.

d. The seller may counter one offer and put aside all others.

e. The seller may ask the listing agent to inform one or more buyers of the multiple offer situation and give one or more buyers the opportunity to submit their highest and best offer by a specific date at which time the seller will reconsider all offers.

One or all of the buyers may withdraw their offers prior to the seller's acceptance.

The seller may reject all offers.

The buyer’s agent should inform the buyer if the buyer’s agent knows of other interest and/or offers, and whether, if the buyers agent knows, if other buyers are aware of each other.

The buyer agent should include a discussion about the earnest money deposit. Specifically, that providing an earnest money deposit does not ensure that this will be the only offer considered nor does it require that the seller respond in any manner, including providing a counter-offer.

The buyer agent should not substitute his/her judgment for the buyers' judgment in the decision of how to proceed when faced with multiple offers. The buyer agent should present the options that promote the buyer's best interests and allow the buyer to decide whether:

1. To increase the offer, including offering in excess of the listing price.

2. To leave the offer as it stands.

To withdraw the offer.

BUYER AGENT DUTY TO SELLER CUSTOMER:

A buyer agent has a duty to treat sellers honestly.

DUAL AGENCY SITUATIONS:

It is possible that multiple offer situations in a specific office may involve dual agency depending on the listing agency's policies. Agents are urged to consult with their designated broker for guidance in handling such situations as it is beyond the scope of a general guideline to address these more complex situations.

TRANSACTION BROKER (NON-AGENT) SITUATIONS:

Maine statute and license law do not preclude the establishment of a non-agent relationship. These guidelines were not intended to address situations beyond the scope of those defined in the statute and license law. Agents are urged to consult with their designated broker for guidance in handling such situations.

OTHER MULTIPLE OFFER SITUATIONS:

1. Back Up Contracts.

It is not uncommon for buyers to express interest in property already under contract. In those instances, it may be in the seller's best interest to have a backup contract. Licensees must exercise care in preparing a back up contract to avoid exposing sellers to liability for two contracts and should discuss thoroughly the ramifications of accepting a back up contract.

Licensees must exercise caution in continuing to market a property under contract, or showing additional properties to a buyer while they are under contract, without the knowledge and consent of all parties to the contract. It is illegal for licensees to undertake any activity which could be construed so as to induce someone to break a contract.

2. Contracts with Contingency Clauses.

The terms of a contract may include a clause which allows the seller to continue to market the property. Typically this clause states that should the seller receive a second offer the first buyer will have a specified time period to remove the contingency and continue with the terms of their contract or give up the contract and have the earnest money deposit returned.

To avoid misunderstanding, properties which are marketed under these circumstances should be offered to buyers with an explanation of their status. However, since the terms of contracts are confidential, notice of contingencies should be made to prospective buyers only with prior written permission from the buyers and sellers who have the property under contract. Licensees are advised to include language in such contracts authorizing the disclosure of the terms of specific contingencies to other buyers and licensees.

Licensees are urged to consult with their designated broker for guidance in handling these special situations as it is beyond the scope of a general guideline to address these more complex multiple offer situations


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