What a wild ride it can be for seller, buyer, and their representatives when a listed property goes into multiple offers. The excitement, anxiety, emotion, and anticipation of the process can be overwhelming especially in regions where multiple offers are less common, however, it does not have to be that way if you keep some core principles in mind. Let’s think through some of those high-level principles to help you through your next multiple offer situation.
It may seem like a strange place to start but let’s go back to the listing of the property. The material element of any transaction is the property, and the legal title holder is the one in control of the property so it stands to reason that at the time of listing a property for sale, there should be a conversation about multiple offers. At the listing stage, it is only theoretical of course, but it helps to discuss such a high-stress situation with the seller before they find themselves in that situation and on the horns of a decision. Discuss with the seller the expected processes surrounding multiple offers, specifically their feelings on the disclosure of multiple offers to other brokerages, along with the advantages and risks associated with the various options.
Timely and Informed
A good chunk of the heavy lifting is done if you have had the discussion regarding multiple offers at the time of listing but that is not sufficient for you to plow ahead in a real multiple offer situation based on the seller's instruction at the listing stage. That was in the land of make-believe before the situation existed but now faced with the situation you need to discuss it again to ensure their feelings or understandings have not changed. This is known as having a timely and informed discussion with the seller and you can take instructions from that conversation on how you proceed.
Under no circumstances, in any situation is a REALTOR® permitted to lie. A client is not able to instruct you to lie, and you can never lie to protect a client's interest, or your own for that matter. Honesty is the first and preeminent duty in every situation for a REALTOR® and can never be worked around. If a client instructs you to lie, you should inform them you are not able to follow that instruction, and should they persist, you must end the relationship. For example, if a seller has decided they do not want to disclose a multiple offer situation and has instructed you not to disclose it, but a fellow REALTOR® asks if there are any other offers, you are not permitted to answer “no”, but you could answer “the seller has instructed me not to disclose any information regarding other offers”. This is honest and complies with the seller's instructions.
In a multiple offer situation, the seller may be tempted to counter offer more than one offer at a time to move the process along more quickly, however, this is bad practice. Every time an offer is countered, it is a rejection of the original offer and the creation of a new offer that could be accepted by the party opposite. For this reason, countering more than one offer at a time puts the seller in a position to possibly sell their house twice and create a legal dispute that never needs to happen. Discuss all offers with the seller on their individual merits and then choose one to counter or accept at a time. Slow and steady wins the race.
Conflicts of interest can happen in multiple offer situations and require special attention. For example, provincially harmonized rules require the broker, or someone delegated by the broker, to receive and present all offers when the listing agent has a buyer interested in writing an offer on the property as well in a multiple offer situation. This is the best practice to ensure decorum and a level of ethical transparency in the process, but should the seller provide written instruction that they want the listing agent to present all offers then it is possible to do so. A word of warning though, a seller’s instruction in this matter is not a free pass, the seller should be fully informed about what they are instructing to ensure that the instruction isn’t for the benefit of the listing agent’s interests over the seller’s best interests which are obligatory as their fiduciary.
MLS® System Considerations
The MLS® system is the single greatest tool available for real estate in Alberta, and this system functions as a cooperative of member brokerages across Alberta. Many sellers choose to list with REALTOR® members because of the proven power of the MLS® system in putting their property in front of the maximum number of buyers through cooperative member relationships so it stands to reason that the average seller would understand the importance of working together with other REALTORS® to affect a transaction. For this reason, the provincially harmonized rules start from the default position that unless instructed by a seller in writing, the default process should be to disclose the existence of multiple offer situations to cooperative MLS® system members to help promote healthy competition over the property. It also pre-supposes that to seek such written instruction, the REALTOR® has had a fulsome and timely discussion about the subject at the time the situation arises.
Understanding that this article doesn’t address every possible situation and how to handle it, I hope it helps to clarify some of the big parts of the process and how to manage the multiple offer situation with a seller client. Discussion, information, transparency, and honesty are the four main ingredients to make the multiple offer cake taste good to clients and REALTORS® alike, and when in doubt talk to your broker!
Provincial Practice Advisor
Bryan has many years of experience in the real estate industry including over 10 years as a former broker in the Edmonton Region.
Email: firstname.lastname@example.orgPhone: 403-209-3619