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 REALTOR®S^Ò of their obligation to treat all parties honestly…” ( Article 1 of the REALTOR®S^Ò Code of Ethics. )

“REALTOR®S^Ò shall submit offers and counter-offers objectively and as quickly as possible.” ( Standard of Practice 1-6 of the REALTOR®S^Ò Code of Ethics. )

REALTOR®S^Ò must "Obey all lawful instructions of the client…" and must also "Be loyal to the interests of the client." and "…must place the interests of the client before all others in negotiation of a transaction and in other activities, except where such loyalty would violate licensee's duties to a customer..." ( AGENCY LAW TCA 62-13-404. Duty Owed To

Licensee’s Clients. )

Perhaps no situation routinely faced by REALTOR®S^Ò 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 REALTOR®S^Ò 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 REALTOR®S^Ò .

· Be aware of your duties to your client – both as established in the Code of Ethics and in Tennessee Agency Law.

· The Code of Ethics requires you to protect and promote your client’s interests. Tennessee Agency Law spells out nine specific duties you owe to your client.

· The Code of Ethics requires that you be honest with all parties. Tennessee Agency Law spells out seven specific duties you owe to other parties and to other real estate professionals.

· Be aware of your duties to other parties – both as established in the Code of Ethics and in Tennessee Agency Law.

· 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. In Tennessee, the seller controls the presentation.

· 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 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 seller – and get direction from him.

· 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 of the Code has long noted that “. . . REALTOR®^Ò 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. ( If a seller client instructs you to reveal or share the terms and conditions of other purchase offers with multiple offerors, you should ask the seller client to put those instructions in writing. It is neither against the Code of Ethics nor Tennessee Law to follow the seller client’s legal and lawful instructions. )

· Article 3 calls on REALTOR®S^Ò 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.