Commonly asked questions about multiple offers
On July 11, 2016
By Peg Ritenour, OAR Vice President of Legal Services/Administration
As the market continues to improve, questions regarding multiple offers and contracts continue to dominate calls to the Ohio Association of REALTORS Legal Hotline. Below are some of the most common questions received.
Q: A listing agent presents an offer to an out-of-town seller over the telephone. The seller verbally indicates his acceptance of that offer, which the listing agent communicates to the buyer’s agent. Before the seller signs the original offer, the listing agent receives another offer, which the seller wants to accept. Is there a binding contract with the first buyer?
A: No. Although the seller verbally accepted the first offer, under the Statute of Frauds there would not be a binding contract because the seller did not sign the offer. Therefore, the seller would be free to accept the second offer.
Q: Negotiations have been going back and forth between a seller and a buyer for several days. The seller is considering a counteroffer from this buyer, when another higher offer is received. Is the listing agent required to notify the first buyer that another offer has been received and give that buyer an opportunity to increase his counteroffer?
A: No, there is nothing that legally requires the seller to notify the first buyer or give him an opportunity to raise his offer. Of course, if the seller wishes to give the first buyer such an opportunity, he may do so, and the listing agent would have to follow these instructions.
Q: A listing agent has received an offer which he is planning on presenting to the seller that afternoon. Before she makes this presentation she is notified by a cooperating agent that another buyer will probably be making an offer the next day. Should the listing agent wait until this second offer is received to present the first offer?
A: The listing agent must present the first offer she has received as soon as possible. Therefore, she should present the first offer that afternoon as planned. However, her fiduciary duties to the seller also require her to notify the seller that another offer may be forthcoming. It will then be up to the seller to decide whether he wants to wait for this offer. This listing agent should review the first offer to determine how long it is open for acceptance, so that it does not expire before the seller decides to accept or counter it.
Q: A seller has received two offers to purchase his property. Can he make counteroffers to both buyers?
A: While he can do this, it is not recommended that the seller make more than one counteroffer at a time. This is because both buyers could accept the counteroffer and deliver notice, placing the seller in the position of having two accepted contracts on his property.
Q: If I receive multiple offers on one of my listings, must I notify all of the agents/buyers that they are in a multiple offer situation?
A: There is nothing in the license law that requires such disclosure. Most agents do so because they believe it is the fair way to handle negotiations and that it could get the buyers to increase their offers. While this may be true, disclosing that there are multiple offers could result in one or more of the buyers withdrawing their offer because they don’t want to be in a “bidding war.” For this reason, Standard of Practice 1-15 of NAR’s Code of Ethics states the existence of other offers should only be disclosed with the seller’s consent.
Legal articles provided in the OAR Daily Buzz are intended to provide broad, general information about the law and is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.