Handling offers from the sellers side

Selling a home is such an infrequent event that many sellers cannot recall the specifics of the selling and offer negotiation process even if they have sold several homes. This post is designed to familiarize sellers with how they might handle offers in a single or multiple offer situation.

We’ll start with the Iowa Code section that pertains to offers:

193E—7.15(543B) Presenting purchase agreements. All written offers to purchase received by a listing broker or listing agent shall be promptly presented to the seller for formal acceptance or rejection. The formal acceptance or rejection of the offer shall be promptly communicated to the prospective buyers. Unless there is written agreement between the seller and the listing broker directing otherwise, the listing broker shall be required to present back-up offers until the transaction has closed.

So, the seller’s agent has to present the first offer promptly and all other offers received up until close. The above is a bit ambiguous however in that the seller is not required to formally reject, accept or respond to any offer, they just need to be given the opportunity to do so.

The agent presents and advises – but the client determines:

The decisions about how offers will be presented, negotiated and ultimately accepted or rejected are made by the client – not the agent. All offers must be communicated and agent must keep client informed of stated interest in property.

Offers and counter offers in writing:

Offers and counter offers should be in writing to ensure that the terms, time frames, and legal obligations of the parties are understood. Written counter offers should include a specific time period for acceptance. Withdrawal of a written offer or counter offer should be made in writing.

“Should” above is not construed as “must”. In this market it is common for the initial offer to be presented in writing and for counter offers to be negotiated verbally until agreement. There are some risks to the verbal method in that there may be miscommunication as to what was agreed upon. The logistics of getting all counteroffer terms in writing (meeting with parties over geographic distances, scheduling availability) before the final agreement may dictate that terms need to be verbalized until agreement.

After presentation terms of offers and counter offers are confidential:

The terms of offers and counter offers may not be disclosed by agent without the prior written consent of both the seller and/or buyer. Disclosing that a full price offer has been made is disclosing a term and may be a violation.

Sellers cannot tell their agent to disclose the terms of another offer to any outside party in order to get a better offer. It would be a breech of the buyer’s confidentiality.

The seller decides whether the existence of an offer or competing offer is confidential:

Disclosing that on offer has been made or that an offer may be received is not confidential information unless the seller specifically request in writing that the agent to keep such information confidential.

In Iowa your agent can disclose freely that an offer has or has not been received unless you direct otherwise. It is my policy to consult with the client on this matter.

Full-price offer does not obligate the seller to accept the offer:

Listing property for sale is an invitation from the seller for buyers to make offers. The seler is not obligated to sell the property even if a buyer makes a full price, cash offer.

The operative principle is that a seller cannot be forced to sell if they don’t want to. However, the broker may demand that the commission be paid if a buyer is brought in at the terms agreed upon in the listing agreement.

When an offer is received we will:

• Discuss the terms of the offer(s) – if competing offers, compare terms.

• Inform the seller of any other interest in the property including:

ü  Potential of other follow on offers

ü  Review scheduled showings

ü  Review recent showings that may require follow up

Your options as seller– one offer:

• Accept, reject, counter, delay during time for acceptance to seek out other offers.

• Explain pluses and minuses of each option – including the potential of a buyer withdrawing an offer during a delay.

• Do nothing.

Again, the seller is not obligated to respond to the offer.

Seller options multiply with competing offers. You may:

• Choose to accept one offer, and inform no one of the other offers.

• Decide to reject all offers and encourage higher offers.

• Counter one offer (may withdraw counter, in writing, prior to acceptance) –   do not inform other buyers.

• Delay acceptance – wait for another offer.

• Alert one or more buyers that they are in a competing offer situation.

• Alert all buyers that they are in a competing offer situation.

• Consider the benefits and detriments of each option – delaying or inviting     all buyers to make their “best” offer may produce better offer(s) or may discourage buyers who may withdraw.

• Do nothing.

The important thing for a seller to remember is that they have choices when negotiating offers. They are not obligated to review offers in order or accept the highest offer either. A seller may also withdraw or modify any counter offer at any time prior to acceptance by the buyer.