Preparing your buyers for a multiple offer situation
On April 17, 2017
By Peg Ritenour, OAR Vice President of Legal Services/Administration
Low interest rates combined with low inventory levels has resulted in an increasing number of buyers competing for the same limited number of properties. In some hot markets, there have even been accounts of sellers receiving as many as 15 offers the day the for-sale sign goes up. While this is great for sellers, it’s leaving many anxious buyers frustrated and upset at losing out on their dream house.
To add to this, a buyer’s frustration can oftentimes be compounded by a lack of understanding about the contract and negotiation process. This can be the result of a buyer’s own false assumptions about the home buying process or misinformation they are told by friends, family and neighbors. Whether someone is a first time buyer or has purchased a home before, as the real estate expert it is important for REALTORS to dispel some of the myths buyers have about negotiating with a seller. By providing such counseling upfront, REALTORS can help their clients have realistic expectations about this process. Below are some of the misconceptions that buyers’ agents should correct before writing that first offer for their client:
- The listing agent/seller must disclose that there are other offers. While sellers will often authorize the listing agent to disclose the fact that a multiple offer situation exists, neither the seller or listing agent has a legal obligation to do this. It is important to explain to the buyer that the listing agent can only disclose the existence of multiple offer if the seller authorizes this.
- The seller has to negotiate with the first buyer who makes an offer. Despite what buyers believe, there is no hierarchy or priority status in multiple offer situations. Just because a buyer is the first one to make an offer on a property doesn’t mean that buyer has any special status in the negotiating process with the seller. Explain to your buyer that the seller is free to accept or counter any offer regardless of the order in which it is received and the seller doesn’t have to counter their offer or give them the right to raise it.
- The seller has to accept a full price offer. Just because a buyer’s offer is full price or cash doesn’t mean the seller has to accept it. Make sure your buyer understands that in some markets in Ohio sellers are getting over asking price. The only time a seller can get in trouble for rejecting a full price offer is if they are doing so because the buyer is a member of a protected class.
- Verbal agreements are binding. While buyers almost always make their initial offer in writing, counter offers are increasing being done over the phone. While this may be faster, it is important for buyers to understand that unless an agreement for the sale of real estate is in writing and signed, it’s not enforceable in Ohio. So while a seller may verbally agree to accept a buyer’s offer or counteroffer, if a better offer comes along the seller isn’t bound by that verbal acceptance and the buyer can lose the property to the second buyer.
- The seller can’t disclose the terms of an offer to a competing buyer. While many buyers – and even agents – may think it’s unethical, there is nothing legally stopping a seller from telling a buyer what another competing buyer offered. That is because neither the seller or their agent owes any duty of confidentiality to the buyer.
- They have the right to change their minds. Depending on the circumstances, this may or may not be true. Buyers who think there is a three day “cooling off” period in Ohio are just plain wrong. If a seller accepts their offer in writing and its delivered they have a binding contract and the buyers can’t just change their mind because they got cold feet or something they like better just came on the market. The same thing is true about rejecting or countering a counteroffer from the seller. If the seller counters the buyer’s offer and the buyer rejects it or counters back, that terminates the seller’s counter and it is no longer open for acceptance. A buyer who suddenly realizes they made a mistake and wants to accept the sellers counter doesn’t get a “do over” unless the seller is willing to reinstate his counter.
Multiple offer situations can often be tricky and stressful for even seasoned REALTORS. Buyers who consider themselves experienced in real estate and negotiations are usually not as knowledgeable as they may think when it comes to handling such situations, especially when emotions run high. REALTORS can head off a lot frustration and misunderstandings by counseling their clients before they find themselves in the middle of a bidding war. By educating your clients and managing their expectations, you can hopefully fill the role of the trusted, knowledgeable adviser who guided them through the home buying experience.