If you represent a buyer in a multiple offer situation, your main concern (just like the listing agent’s) is due diligence to your client. Diligence means doing the best you can to see to it that your client gets the property they want at the best price in the circumstances. If your client got their best offer on the table and another buyer beat it, that’s one thing. If they didn’t get their best offer on the table, that’s quite another.
As the buyer’s agent, you don’t want misreading the market or making a low-ball offer to be your fault. That means evidence in your client file that shows a discussion of the market and how the terms of the offer were arrived at. If multiple offers are common in the market, one would expect the buyer to have been warned – in writing. Of course, as with any offer, a CMA goes a long way toward showing diligence in helping the buyer craft an offer. Tips and tools for buyer agents are included in the section on Handling Multiple Offers.
Disappointed buyers, and their agents, are quick to believe they have been the victims of deceit in multiple offer situations. This belief is especially likely if one of the competing buyers is represented by an agent in the same company as the listing agent. It is almost certain to be the belief if the listing agent also represents one of the competing buyers. However, given the risk to the seller’s agent, it is very unlikely there are as many shenanigans in the presentation of offers in multiple offer situations as is sometimes believed.
Whatever the actual rate of shenanigans in the presentation of offers, there isn’t much a buyer’s agent can do, other than to take advantage of MLS presentation rules and state law. Most multiple listing services have rules on presentation of offers – know them and follow them. Oregon, like most states, requires the seller’s agent to present all offers “in a timely manner.” State law also requires the listing agent to have a “written record” of the date and time an offer is presented.
Taken together, MLS rules and state law make it exceedingly foolhardy for a listing agent to sit on an offer and relatively easy for real estate investigators to catch them if they do. What MLS rules and state laws won’t do, however, is guarantee that any particular buyer, even if they might ultimately be willing to pay the most for the property, will actually get the property. This uncertainty, always part of any contract formation situation, has lead to the growing use of “escalator clauses.”
Escalator clauses sound good to buyers forced into hot markets but there are problems. These problems can trap an unwary selling agent. Certainly, no agent should ever suggest the use of such a clause without having discussed the drawbacks of such clause with their client. That discussion, as with any discussion involving potential breach of agency duties, must be documented. Click here for a full explanation of escalator clauses. Tips for dealing with escalator clauses are also included in Handling Multiple Offers.
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