Multiple Offers: The Seller is in the Driver’s Seat

A Reminder from Kristian Tzenov, Real Estate Regulatory Compliance Advisor

With the market as hot as it’s been this year, there’s no surprise that a lot of people have been reaching out to RECA about situations involving multiple offers—some are consumers who are unsure about how multiple offers work, and some are licensees who feel the other party’s licensee is not being fair in a multiple offer situation.

A common thread running through all of the calls and emails is a misunderstanding of who is fundamentally in control in a multiple offer situation.

Who Is In Control?

The most important take-away when it comes to multiple offers, is that the seller determines the process. This is so important that I’ll say it again: the seller determines the process. They are in the driver’s seat.

I am often asked by licensees, “but isn’t there a duty of fairness between the sellers, buyers, and licensees?” The answer is no. While sellers and buyers have a duty of honesty, there is no duty of fairness to each other. Whether representing the sellers or the buyers, licensees are required to act in the best interests of their clients.

It is the seller’s choice whether they disclose the multiple offer situation to other potential buyers. They may also choose whether to disclose the amount of the other offer(s) and the terms of those offer(s). The seller can also choose to disclose this information to one prospective buyer and not another. The seller can choose any offer that came in, for whatever reason.

Again, the seller is in the driver’s seat and there is no duty of fairness.

What Can Buyers Do?

The best advice for a licensee with buyer clients in a multiple offer situation is to advise the buyer of the advantages and disadvantages of their options, so your clients can decide on the path that is best for them. The buyer’s options include:

• leaving their offer as it as and hope the seller chooses it
• withdrawing their offer
• increasing the amount of their offer before its presented
• reconsidering the fixtures, chattels, terms and conditions of their offer to be more appealing to the seller
• including a term or condition that will compel the seller to deal with their offer at the time of presentation or face withdrawal
• requiring the seller to agree that they will not disclose the price and terms of your client’s offer to any other buyer prior to the buyer making an offer

Acting Honestly

As we discussed above, sellers and buyers have a duty of honesty. However, honesty does not mean that the parties are required to be transparent.

Many of the complaints that come into RECA about multiple offers are from buyers who feel a seller and their licensee weren’t honest with them about a multiple offer situation. Often this is associated with the expectation that the seller is required to be transparent with buyers. It is essential that licensees representing buyers understand the multiple offer process in relation to the legal obligations between buyers and sellers.

That being said, whether you’re representing a seller or a buyer, licensees must conduct themselves in a way that maintains trust and confidence with their clients.

Even though the seller chooses how the decision is made, licensees must ensure that they are acting honestly and lawfully. Licensees cannot participate in dishonest behaviour and are prohibited from following unlawful instructions. For example, when representing the seller a licence can’t follow an instruction to communicate that the seller has received other offers if other offers have not been received. If a licensee does not act honestly and lawfully, it is conduct deserving of sanction.

Multiple Offers Best Practice

The best approach when dealing with multiple offers is to educate your clients. Provide them with the advantages and disadvantages of the various options available to them, as well as the potential responses of the other party.

Recognize conflicts and other circumstances that may prevent you from acting in your clients’ best interests, such a multiple offer situation where you might be representing the seller and one of the buyers. It is not sufficient to disclose the conflict. Licensees must provide their clients with options to resolve the conflict and allow the clients to choose the option they feel is in their best interests.