Perspective matters. How does the collection of laws and rules related to multiple offers look to a buyer’s representative? How does that collection look to a seller’s representative?
ORLANDO, Fla. – As we continue to navigate an aggressive seller’s market, frustrations are on the rise. We continue to hear all sorts of stories on the Florida Realtors Legal Hotline about angry buyers, picky sellers, and members struggling to navigate this market.
We previously looked at several rules in play in a multiple offer situation: “How Should I Field Multiple Offers?”. That article was written from the perspective of a listing Realtor, but since this market has grown more intense since then, it’s worth revisiting from both perspectives.
To recap, here are the rules we touched on, from a listing perspective:
- Honesty. Real estate licensees must always be honest and can generally be held liable at multiple levels if they are deceptive (criminal or civil court, FREC, or local board).
- Confidentiality. There is typically some level of confidentiality owed to a seller, although the scope of confidentiality will depend on the nature of the listing broker’s relationship to the seller and specific conversations they have.
- Withdrawal deadline. This is more of a legal issue for the buyer and seller, but they should be aware that the Florida Realtors/Florida Bar contracts provide an option for offers to expire and be withdrawn if not signed and returned by a deadline.
- Standard of Practice 1-7. NAR’s Code of Ethics requires a listing broker to write back if the buyer’s agent asks them to verify that an offer was presented (or that they had written instruction to not present an offer).
- Courtesy. While not required, courtesy and professionalism are at the heart of many of these conversations. So many complaints and legal disputes could have been resolved or headed off with a little common courtesy.
What can we add to this if we look at it from the perspective of someone representing a buyer?
Statute of Frauds
It doesn’t matter how promising negotiations seem or how close parties get to a fully executed contract. Until they cross the finish line, a buyer doesn’t have an enforceable agreement. This centuries-old rule only applies to certain types of contracts, including contracts for the sale and purchase of real property. It requires both a written document and signature before enforceable contract rights are created.
That means even if a buyer and seller verbally agree to every single term of a contract, beyond any reasonable doubt, the buyer doesn’t yet have an agreement.
Looking at this rule from the perspective of a buyer’s representative, it would be extremely helpful to avoid phrases like “we have a deal,” or “seller accepted our offer” until you have a fully executed contract in hand. It’s also helpful to encourage guarded optimism, even if negotiations seem to be going well.
Multiple methods to field multiple offers
The law allows sellers to use a wide variety of tactics when it comes to fielding multiple offers. A mantra we often repeat on the Legal Hotline is that a seller is welcome to accept, reject, counter, or ignore any offer(s) that come their way. Within that framework, you need to be prepared for anything. Remember, the seller ultimately controls the decision about how to handle multiple offers.
You could encounter any of the following, and possibly even a few more:
- The seller requests the highest and best offers from all buyers by a deadline.
- The seller deals with just one buyer.
- The seller engages multiple (but not all) buyers to see if they are willing to improve their offers.
- The seller holds an auction.
- The seller decides to wait a while before making a decision.
One aspect of confidentiality is that you may not know the precise scope sellers have with their listing broker. If they are a single agent, you may not know much at all about what the seller thinks of your buyer’s offer. If they are a transaction broker, they could still be limited by anything the seller has requested they keep confidential. Therefore, don’t count on getting a detailed description of what happened after you submit an offer.
On the other hand, the terms of a buyer’s offer are generally not considered confidential. A seller could possibly use terms of your buyer’s offer as bargaining tools with other buyers. If you encounter a buyer who doesn’t like this, they can always speak with an attorney about obtaining a confidentiality agreement. While these agreements aren’t as common in residential transactions as they are in commercial, they are a tool buyers could employ if they feel strongly enough about it.
The National Association of Realtors®’ (NAR) Code of Ethics includes an article that provides Realtors shall not engage in any practice inconsistent with exclusive representation or exclusive brokerage relationship agreements that other Realtors have with clients. If you drill down, the more specific Standard of Practice 16-13 provides that, “All dealings concerning property exclusively listed … shall be carried on with the client’s representative or broker … except with the consent of the client’s representative or broker or except where such dealings are initiated by the client.”
Therefore, while it may be tempting to call the seller just to see if your buyer’s offer was presented, it would likely be a violation of the Code of Ethics.
Remember, you can send a written request to the listing Realtor to have them confirm whether they submitted the offer or had written instructions to withhold it (Standard of Practice 1-7 above). You will likely just receive a short message along the lines of “yes, I submitted the offer,” but it does force them to go on record with a response.
Presentation of offers
There is a rule in NAR’s Handbook on Multiple Listing Policy that enables cooperating brokers to be present when the buyer’s offer is presented. However, it’s worth noting that the seller can override this request by informing the listing broker (in writing) that they don’t want the cooperating broker present. One fine-tuned difference between this rule and Standard of Practice 1-7 is that, in this case, the cooperating broker is entitled to see a copy of a seller’s written denial of the request.
If you look closely at Standard of Practice 1-7, the buyer’s broker is not entitled to anything from the seller. A brief written response from the listing broker confirming they submitted the offer (or had written instructions from seller to not present it) is enough.
Joel Maxson is Associate General Counsel for Florida Realtors
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