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Code of Ethics
Typically, state governments establish laws addressing client confidentiality and disclosure, and may even denote the timeframe within which one must respond to an offer of purchase on real property. The REALTOR® Code of Ethics also establishes requirements on responding to offers and protecting the interests of clients:
- Article 1, Standard of Practice 1-6 denotes that, “REALTORS® shall submit offers and counter-offers objectively and as quickly as possible.”
- Article 1, Standard of Practice 1-15 addresses REALTORS®’ obligation in multiple-offer situations: “REALTORS®, in response to inquiries from buyers or cooperating brokers shall, with the sellers’ approval, disclose the existence of offers on the property. Where disclosure is authorized, REALTORS® shall also disclose, if asked, whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker.”
- Article 1, Standard of Practice 1-7 denotes that, “When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing. Upon the written request of a cooperating broker who submits an offer to the listing broker, the listing broker shall provide, as soon as practical, a written affirmation to the cooperating broker stating that the offer has been submitted to the seller/landlord, or a written notification that the seller/ landlord has waived the obligation to have the offer presented. REALTORS® shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord. REALTORS® shall recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract or lease."
- Article 1, Standard of Practice 1-8 denotes that “REALTORS®, acting as agents or brokers of buyers/tenants, shall submit to buyers/tenants all offers and counter-offers until acceptance but have no obligation to continue to show properties to their clients after an offer has been accepted unless otherwise agreed in writing.”
- Article 1 denotes that “When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client.”
- Article 1, Standard of Practice 1-9 establishes requirements for ensuring client confidentiality and non-disclosure compliance.
Find the full text of the REALTOR® Code of Ethics here.
Part 4, Appendix IX- Presenting and Negotiating Multiple Offers (National Association of REALTORS®, Multiple Offers, Jan. 1, 2023)
“Perhaps no situation routinely faced by REALTORS® can be more frustrating, fraught with potential for misunderstanding and missed opportunity, and elusive of a formulaic solution than presenting and negotiating multiple purchase or lease offers and/or counter-offers on the same property. Consider the competing dynamics. Listing brokers are charged with helping sellers get the highest price and the most favorable terms for their property. Buyers’ brokers help their clients purchase property at the lowest price and on favorable terms. Balanced against the Code’s mandate of honesty is the imperative to refrain from making disclosures that may not, in the final analysis, be in a client’s interests.”
Legal & Ethical Considerations
4 Ways to Reduce Risk Amid Multiple Offers (REALTOR® Magazine, May 6, 2021)
“Across the country, listings are being scooped up so quickly that there’s little inventory accumulation. Contract signings increased 23.3% year over year in March, according to the National Association of REALTORS® Pending Home Sales Index. Buyer demand has indeed created a hot market, but it’s also putting pressure on agents to help their clients compete amid multiple offers.”
Can a Home Seller Under Contract Still Accept a Higher Offer? (realtor.com®, Aug. 9, 2022)
“As a seller in this case, you can still accept the other or better offer as long as you are still in attorney review,” says Lukasz Kukwa, a real estate agent with Coldwell Banker Residential Brokerage in Westfield, NJ. “Although this will cause some pushback and sometimes isn’t looked at as the most ethical, a seller can legally still accept any other offer up until attorney review conclude as the deal isn’t officially under contract.”
How to Handle Bidding Wars Legally (MetroTex Association of REALTORS®, 2020)
“Be mindful of your legal and ethical duties. Your state likely has laws and regulations regarding timeframes for presenting offers and what needs to be disclosed to the other party in a multiple offer situation. Some states, for example, prohibit revealing the terms of a buyer’s offer without the buyer’s consent. The REALTOR® Code of Ethics also speaks to handling multiple offer situations, such as requiring that REALTORS® “protect and promote the interest of their client” in multiple offer situations.”
Advice for Real Estate Professionals
What is an Escalation Clause in Real Estate and When You Should Use One (realtor.com®, Mar. 6, 2023)
“Escalation clauses in real estate can cause a lot of stress for homebuyers, especially when their dream home is on the line—but when they’re boiled down to the basics, they’re fairly straightforward. Remember to be realistic, to be comfortable with how much of a competing bid you’re willing to offer and put down as a down payment, and to confidently go after a piece of real estate at that price.”
How You can Ensure Your Clients Get a Fair Appraisal (REALTOR® Magazine, Feb. 8, 2023)
“Agents can be advisers to their clients when they’re selecting a lender. Remind your clients to ask lenders about their protocols around fair housing and implicit bias training as well as their criteria for selecting appraisers. You also can provide appraisers with relevant, objective data about your listing and comparable home sales. Remember, it’s OK for you to talk to appraisers and answer questions they may have about the home.”
11 Ways to Win a Bidding War (Boston Agent, Mar. 19, 2021)
Local agents in Boston shared the tips and tricks they have been counting on to gain advantage in today’s unprecedented market including; offering a pre-inspection, checking with the seller pre-offer to see if there is something – like a flexible closing date – your clients can offer, working quickly to keep the time frame tight, and making sure your client has solid financial backing.
Advice for Clients
Housing Market 2023: Why Some Homes are Still Causing Bidding Wars Amid a Cooling Market (Yahoo! Finance, Mar. 16, 2023)
“While the market is cooling down on a national scale, there are still some areas, especially in growing Southern cities, where values are still going up,” added Martin Orefice, CEO at Rent To Own Labs. “Another factor to keep in mind is that while many buyers and sellers are just scraping by in this economy, there are still people out there who have money to burn and simply have to have that particular house. This can be especially true in high-end retirement communities or fast-growing rich suburbs.”
7 Bidding War Mistakes Today’s Homebuyers Are Making in Droves (realtor.com®, Jul. 25, 2022)
In the heat of the moment, buyers are prone to making emotional decisions. Here are 7 mistakes to avoid when negotiating for your dream home: spending every last cent, bidding with many contingencies, bidding with no contingencies, counting on a second chance, using “best and final offer,” using an escalation clause, and not knowing the home’s true value.
Making Multiple Purchase Offers
, Nov. 11, 2021)
“Build contingencies into your offers if you're determined to make more than one. You can even hinge one of your contingencies on the acceptance by another seller of another offer. Your other offers will automatically become null and void after the first is accepted, or if other of your contingencies aren't met.”
A Buyers’ and Sellers’ Guide to Multiple Offer Negotiations (National Association of REALTORS®)
“This consumer-focused brochure is designed for use by REALTORS® to inform buyers and sellers of the potential consequences of multiple offer situations. It was approved by the Professional Standards Committee at the 2005 Annual Convention in San Francisco and is excerpted from the Presenting and Negotiating Multiple Offers white paper found in NAR's Code of Ethics and Arbitration Manual.”
eBooks & Other Resources
The following eBooks and digital audiobooks are available to NAR members:
Close That Sale (Audiobook)
The Altman Close: Million-Dollar Negotiating Tactics from America's Top-Selling Real Estate Agent (eBook)
The Complete Idiot's Guide to Buying and Selling a Home (eBook)
How a Real Estate Agent Can Prepare for a Successful Negotiation (Audiobook)
Improvisational Negotiation (eBook)
Negotiation Genius (eBook)
Have an idea for a real estate topic? Send us your suggestions.
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