Presenting and Negotiating Multiple Offers

From the 2012 Code of Ethics and Arbitration Manual
Subject: Ethics

Part Number: Part 04 -
Part Title: The Ethics Hearing
Section/Form Number: Appendix IX to Part 04
Section/Form Title: Presenting and Negotiating Multiple Offers

Appendix IX to Part Four
 

Presenting and Negotiating Multiple Offers
“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 2012 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 or lease offers and/or counter-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. (Revised 11/01)

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 is fair? What is honest? What is to be done? Who decides? And
why is there not 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 is not a single,
standard approach to dealing with multiple offers, there are
fundamental principles to guide REALTORS®. While these guidelines
focus on negotiation of purchase offers, the following general
principles are equally applicable to negotiation of lease agreements.
(Revised 11/01)

• Be aware of your duties to your client—seller or buyer—both as
established in the Code of Ethics and in state law and regulations.
(Revised 5/01)
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, whether counter-offers will be made and
ultimately which offer, if any, will be accepted, are made by the
seller—not by the listing broker. (Revised 5/01)

• Remember that decisions about how counter-offers will be
presented, how counter-offers will be negotiated, and whether a
counter-offer will be accepted, are made by the buyer—not by the
buyer’s broker. (Adopted 5/01)

• 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.

• When entering into buyer representation agreements, explain to
buyers that you or your firm may represent more than one buyerclient,
that more than one of your clients or your firm’s clients may be
interested in purchasing the same property, and how offers and
counter-offers will be negotiated if that happens. (Adopted 5/01)
Explain the pluses and minuses of various negotiating strategies (that
a “low” initial offer may result in the buyer purchasing the desired
property at less than the listed price—or in another, higher offer from
another buyer being accepted; that a full price offer may result in the
buyer purchasing the desired property while paying more than the
seller might have taken for the property, etc.). (Adopted 5/01)
Explain to the buyer that sellers are not bound by the Code of Ethics.
Sellers, in multiple offer situations, are not prohibited from “shopping”
offers. Real estate brokers may, unless prohibited by law or regulation,
“shop” offers. Therefore, REALTORS® assisting purchasers in
formulating purchase offers should advise those purchasers it is
possible that the existence, terms, and conditions of any offer they
make may be disclosed to other purchasers by sellers or by sellers’
representatives except where such disclosure is prohibited by law or
regulation. (Adopted 5/05)
Remember—and remind the buyer—that the decisions are theirs to
make—not yours, and that you are bound by their lawful and ethical
instructions. (Adopted 5/01)

• 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.

• When representing sellers or buyers, be mindful of Standard of
Practice 1-6’s charge to “. . . submit offers and counter-offers
objectively and as quickly as possible.” (Revised 5/01)

•With the seller's approval "...divulge the existence of offers on the
property" consistent with Standard of Practice 1-15. (Adopted 11/02)

•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. Similarly, buyer brokers should make
reasonable efforts to keep listing brokers informed about the status of
counter-offers their seller-clients have made. (Revised 5/01)

• 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 than 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).
(Revised 5/05)