Attorney Bruce Aydt, ABR, CRB, SRS, is a national real estate educator, a Missouri real estate broker, and past chair of the National Association of REALTORS® Professional Standards Committee.
Offers: Fair Play
When the competition for a house is hot, communicate with clients early and often.
March 1, 2003
Q.I presented an offer on a listing as a buyer’s agent. The sellers’ agent shopped the offer, including terms and conditions, to salespeople in her office to see if they had buyers who could make competitive offers.
Several salespeople presented offers, which were countered; one was accepted. My buyer’s offer was never countered. Naturally, the seller’s agent was obligated to get the best terms possible for her client. But wasn’t she also obligated to treat all parties fairly? Was this approach ethical?
A. Dealing with conflicting interests in multiple offers is a challenge. “Presenting and Negotiating Multiple Offers,” Appendix IX to Part Four of the Code of Ethics and Arbitration Manual, offers several guiding principles. First and foremost, all negotiations on behalf of clients should “protect and promote” their interest, as stated in Article 1 of the Code. Sellers’ agents should consult with clients early on about what to disclose and to whom.
When seller clients instruct listing agents to disclose terms of competing offers, the agents should consult with their broker and attorney to ensure the disclosure is legal in their state and for guidance on how to carry out their clients’ instructions.
Article 1 also requires all parties be treated honestly. Appendix IX notes that all those who’ve made purchase offers should be advised about the existence of any other purchase offers. And, Article 3’s mandate to cooperate implicitly includes the idea that listing brokers should make reasonable efforts to keep cooperating brokers informed. Finally, sellers’ and buyers’ agents should discuss early in the relationship with clients what their negotiation options are if multiple offers arise.
Q. I work as a transaction broker. I told a buyer on a Thursday about a unit listed in the MLS for $289,000. That day, we put together an offer to purchase for $240,000, but he told me to hold the offer until Monday and that this was his top price.
Another prospective buyer asked me Friday what was for sale in the same building. I told him about the $289,000 unit and that an offer would be presented Monday. He wrote a full-price offer for the condo. I told the original buyer I had an offer from another buyer and asked whether he’d like to continue bidding. He said no. The second buyer purchased the unit. The first buyer now says I acted unethically, because I was supposed to be working only for him and not soliciting other offers. Were my actions ethical?
A. Full disclosure is important in your working relationships with buyers. Transaction broker (or non-agent) duties vary significantly in states where that type of relationship is legal. Standard of Practice 1-2 stipulates that the Code of Ethics applies to “REALTORS® acting as agents or in legally recognized non-agency capacities,” such as transaction broker.
It’s wise for buyer representatives (regardless of the legal nature of their relationship with their buyer client) to counsel buyers about “what ifs” that may arise before starting a working relationship. For instance, discuss what will happen if another buyer wants to view or make an offer on a property in which the first buyer has interest. The best way is to enter into a written buyer representation agreement with a clause addressing this issue. (Bear in mind “representation” is a broader term than “agency” and encompasses services provided by transaction brokers, according to NAR.)
It may not feel right to tell buyers about what-if scenarios, but it’s critical they understand what to expect when other buyers enter the picture.
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