Recommendation of the Professional Standards Committee of the National Association of REALTORS®
"When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their clients. This obligation to the client's interests is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly."
(from Article 1 of the 2001 REALTORS® Code of Ethics.)
"REALTORS® shall submit offers and counter-offers objectively and as quickly as possible."
(Standard of Practice 1-6).
Perhaps no situation routinely faced by REALTORS® can be more frustrating, fraught with potential for misunderstanding and missed opportunity, and elusive of a formulaic solution than presenting and negotiating multiple purchase offers on the same property. Consider the competing dynamics. Listing brokers are charged with helping sellers get the highest price and the most favorable terms for their property. Buyers' brokers help their clients purchase property at the lowest price and on favorable terms. Balanced against the Code's mandate of honesty is the imperative to refrain from making disclosures that may not, in the final analysis, be in a client's interests.
Will disclosing the existence of one offer make a second potential purchaser more likely to sign a full price purchase offer - or to pursue a different opportunity? Will telling several potential purchasers that each will be given a final opportunity to make their best offer result in spirited competition for the seller's property – or in a table devoid of offers?
What's fair? What's honest? What's to be done? Who decides? And why isn't there a simple way to deal with these situations?
As REALTORS® know, there are almost never simple answers to complex situations. And multiple offer presentations and negotiations are nothing if not complex. But, although there isn't a single, standard approach to dealing with multiple offers, there are fundamental principles to guide REALTORS®.
- Be aware of your duties to your client - both as established in the Code of Ethics and in state law and regulations.
- The Code requires you to protect and promote your client's interests. State law or regulations will likely also spell out duties you owe to your client.
- The Code requires that you be honest with all parties. State law or regulations will likely spell out duties you owe to other parties and to other real estate professionals. Those duties may vary from the general guidance offered here. REALTORS® need to be familiar with applicable laws and regulations.
- Be aware of your duties to other parties - both as established in the Code of Ethics and in state law and regulation.
- Remember that the decisions about how offers will be presented, how offers will be negotiated, and ultimately which offer will be accepted, are made by the seller - not by the listing broker.
- When taking listings, explain to sellers that receiving multiple, competing offers is a possibility. Explain the various ways they may be dealt with (e.g. acceptance of the "best" offer; informing all potential purchasers that other offers are on the table and inviting them to make their best offer; countering one offer while putting the others to the side; countering one offer while rejecting the other offers, etc.).
- Explain the pluses and minuses of each approach (patience may result in an even better offer; inviting each offeror to make their "best" offer may produce a better offer(s) than what is currently on the table - or may discourage offerors and result in their pursuing other properties.)
- Explain that your advice is just that and that your past experience cannot guarantee what a particular buyer may do.
- Remember – and remind the seller – that the decisions are theirs to make – not yours, and that you are bound by their lawful and ethical instructions.
- If the possibility of multiple offers – and the various ways they might be dealt with – were not discussed with the seller when their property was listed and it becomes apparent that multiple offers may be (or have been) made, immediately explain the options and alternatives available to the sellers – and get direction from them.
- Be mindful of Standard of Practice 1-6's charge to ". . . submit offers and counter-offers objectively and as quickly as possible."
- While the Code of Ethics does not expressly mandate "fairness" (given its inherent subjectivity), remember that the Preamble has long noted that ". . . REALTOR® has come to connote competency, fairness, and high integrity . . ." . If a seller directs you to advise offerors about the existence of other purchase offers, fairness dictates that all offerors or their representatives be so informed.
- Article 3 calls on REALTORS® to ". . . cooperate with other brokers except when cooperation is not in the client's best interest." Implicit in cooperation is forthright sharing of information related to cooperative transactions and potential cooperative transactions. Much of the frustration that occurs in multiple offer situations results from cooperating brokers being unaware of the status of offers they have procured. Listing brokers should make reasonable efforts to keep cooperating brokers informed.
- Realize that in multiple offer situations only one offer will result in a sale and one (or more) potential purchasers will be disappointed that their offer was not accepted. While little can be done to assuage their disappointment, fair and honest treatment throughout the process; coupled with prompt, ongoing and open communication, will enhance the likelihood they will feel they were treated fairly and honestly. In this regard, ". . . REALTORS® can take no safer guide then that which has been handed down through the centuries, embodied in the Golden Rule, 'Whatsoever ye would that others should do to you, do ye even so to them'" (from the Preamble to the Code of Ethics).