When your home is on the market, it is so exciting to receive an offer! But what happens when you receive multiple offers? Find out how you can handle it! New Standard of Practice Offers Guidance. AUGUST 2003 | BY BRUCE AYDT
Working as a buyer’s agent, I submitted a bid on a home to the listing agent on behalf of my client. The listing agent informed the buyer and me later that day that the sellers had submitted the offer to their attorney, who was out of town, and we’d hear the next day whether our offer had been accepted. The next day the listing agent told me another offer had been made and accepted. This was the first time my client and I were informed of the other offer.
Is there anything I can do in this circumstance? When should we have been informed of the other offer?
The presentation and negotiation of multiple offers is often misunderstood. The NATIONAL ASSOCIATION OF REALTORS® Professional Standards Committee and Board of Directors recently adopted a new Standard of Practice in the Code of Ethics specifically addressing one aspect of these difficult situations. Standard of Practice 1–15, which became effective January 2003, states, “REALTORS®, in response to inquiries from buyers or cooperating brokers shall, with the sellers’ approval, divulge the existence of offers on the property.”
This standard is the first specific guidance in the Code about what to do when you receive multiple offers. The key concepts in the standard are that the existence of multiple offers must be disclosed 1) when a buyer or cooperating broker asks about previous offers and 2) if the sellers approve. Some practitioners believe, mistakenly, that they’re automatically required to disclose multiple offers on a property regardless of whether the seller wants to or whether the buyer or buyer’s agent asks about other offers. The key concept for listing agents to remember is that their client, the seller, has the right to negotiate the sale of his or her property in any manner that’s legal under state law. Always consult with your clients about how to handle negotiations involving multiple offers. For additional guidance, read “Presenting and Negotiating Multiple Offers” in Appendix IX to Part Four of the Code of Ethics and Arbitration Manual.
A salesperson I know works with a client who buys and sells a lot of properties. Recently the salesperson listed a property for $95,000 and sold it to the aforementioned client for $92,000. A couple of years ago, I performed a market analysis on that house for his client and estimated the house was worth about $115,000.
About two weeks after the closing, the salesperson listed the house on behalf of the same client for $124,900. It sold for $119,000. Was the salesperson unethical in listing the property at a low price initially and then relisting it at a higher price, thereby earning two commissions?
If what you describe is accurate, the salesperson may have acted unethically. If the salesperson didn’t list the property at a price reflecting true market value, based on an objective market analysis, and knew he was underpricing the property, he didn’t “protect and promote” his seller client’s best interests as required by Article 1 of the Code of Ethics. Salespeople must always subordinate their interests to those of their clients.
In addition, if the salesperson had established a seller agency agreement with the original seller and a buyer agency relationship with the buyer, he then had created a dual agency situation. Besides disclosing that relationship to both sides up front, the salesperson is obligated to be neutral in the transaction, not favoring one client over another.