Dealing with Multiple Offers

Multiple offers are picking up in the Tri-County area, as buyers are pursuing limited supply in certain areas and price points.

Byron King, General Counsel of the South Carolina Realtors® Association (SCR) shared some basic guidelines that will help agents to navigate multiple offers.

Many hands reaching out for keySCR’s first recommendation is to counsel buyers and sellers to use the NAR recommended “highest and best” multiple offer deadline procedure.  As with any multiple offer negotiation procedure, best offer wins.  SCR form 312 allows the seller to reject offers and set up a “highest and best” offer deadline.  In this form, sellers discourage the use of “escalation” or “escalator” clauses.

SCR also recommends that agents counsel buyers that offers are not confidential.  For buyers who insist on making their offer confidential, those buyers should be told to hire a law firm to draft the confidentiality agreement and discuss the time/cost to enforce a breach of the confidentiality agreement in court.  For most people, confidentiality agreements are not a good idea.  Confidentiality agreements are often more suited for high price property transactions and/or famous ones.

SCR further recommends that agents counsel buyers to use highest and best offers without an escalation clause because highest and best offers have the best chance of prevailing and getting the property.  Also, sellers discourage escalator clauses in SCR312 (if all buyers use escalator clauses, then all offers ratchet up to highest and best anyway).  An escalation clause means there is no material term of “price” in the contract so the contract is arguably not enforceable.  Typically, the next highest offer is used to calculate price in the escalator clause offer.  This lack of a material term (price) could result in seller selling to subsequent higher offer buyer with no recourse from the buyer who thought they had a contract from the multiple offer scenario.

Because of unauthorized practice of law issues (felony, ethics, license law, void contract, lawsuits), Realtors® with buyers who insist on a confidentiality of offer agreement or using an escalator clause should tell the buyer to hire a law firm to draft/approve the language in the confidentiality agreement and/or escalator clause.

Recently, Byron King asked NAR professional standards staff for thoughts on ethics in multiple offers especially regarding escalator clauses.  NAR responded by deferring the issue back to South Carolina and did not provide any additional information.  NAR also did not offer additional information on multiple offers and variable rate commissions, so Article 3, Standard of Practice 3-4, Case Interpretation 3-8, and Case Interpretation 1-30 all are still in the manual without modification.

So using SCR312 to reject all offers and create a deadline for re-submitting highest and best offers without escalation clauses is currently the SCR recommended method for all Realtors® to handle the typical multiple offer residential transaction.

In addition to submitting a highest and best price, other terms that may be favored by sellers include:  higher earnest money deposit, higher due diligence termination fee, shorter due diligence time frame, cash offers, agreeing to buy without asking for repairs (as is), short time to closing date, shorter inspection period, lower or zero seller paid buyer’s transaction costs, and taking into account any seller requests such as closing date after school ends, etc.

Additional Documents

Multiple Offers Guide
Presenting & Negotiating Multiple Offers Guide