Multiple Counter Offers: Sometimes Confusion, Sometimes Deception

Provided By Realty Times

In many parts of the country resale inventory has declined steeply and properties for sale - particularly those at the lower end of the price range - are frequently receiving multiple offers. This may be some cause for exhilaration, but also it creates a potential for confusion and frustration.

When there are multiple offers sellers may find themselves in a situation where they would like to make multiple counter offers. Seldom does one offer among a few stand out so clearly with respect to price and terms that a seller will just want to accept it as is, without giving anyone else even a chance to better it.

Perhaps the most common multiple offer situation is one in which none of the offers is as high as the listing price. Especially in recent years, almost every potential buyer wants to offer a bit less, even if the list price appears to be a good one.

There is, though, the other end of the spectrum - when the list price is clearly below market value - and everyone offers above it.

Of course price is not the only factor. Frequently, in a multiple offer situation, one buyer may specify an acceptable price, but unacceptable terms (e.g. a very long escrow period); whereas another buyer may have desirable terms (e.g. cash and a short escrow), but an unacceptable price.

So a seller might want to counter to both. To buyer A he might say, "I'll take your price, but no more than a thirty-day escrow." To buyer B, "Your terms are OK, but the price needs to come up by $10,000."

Of course it could be much more complicated than that, and there might be five or six parties making an offer.

Suppose a seller makes counter offers to two or more parties. What if they all accept? Uh-oh. That could lead to problems.

I can remember the dark ages of real estate when the prevailing sentiment (it shouldn't be dignified by calling it a "rule") was that "the first signed acceptance back is the one that wins." That led to bizarre scenarios with anxious buyers waiting in a car outside the seller's home, waiting for their agent to bring out a counter for them to sign. Needless to say, more than a few disputes arose in those multiple counter offer situations.

Some years ago the Standard Forms Committee of the California Association of Realtors® (CAR) devised an imaginative and thoughtful solution for the multiple counter offer situation. They added a couple of paragraphs to what was already a standard counter offer form. The first one (¶ 4) says "[ ] (if checked) MULTIPLE COUNTER OFFERS: Seller is making a Counter Offer(s) to another prospective buyer(s) on terms that may or may not be the same as in the Counter Offer. Acceptance of this Counter Offer by Buyer shall not be binding unless and until it is subsequently re-Signed by Seller in Paragraph 7 below…my underline]" and then goes on to say how long the buyer has to respond.

The second addition (¶ 7) says, "MULTIPLE COUNTER OFFER SIGNATURE LINE: By signing below, Seller accepts this Multiple Counter Offer." And then it provides a place for signature, along with a warning to the seller not to sign it until after the Buyer has signed. When this second signature is obtained, it confirms which of the accepted counter offers he has chosen.

So the seller gives out multiple counters, but none of them are binding. He is only bound if he subsequently puts a second signature on one that has been accepted by a buyer. Even if all the buyers had accepted what was countered to them.

Of course it could happen that none of the seller's counter offers will be accepted. That is then the seller's tough luck, just as could happen with a single counter offer. Making a counter offer is a rejection of the original offer. The seller who makes a counter doesn't retain the right to go back to the original, unless the buyer agrees.

The standard CAR counter offer, with the optional provision for multiple counter offer situations, has done much to clear up the confusion and misunderstandings that might exist in a multiple offer situation. That is a good thing.

Regrettably, the form also provides a potential for deception. The fact that some listing agents will exploit that potential is a not-so-good thing. We will discuss that issue in the next column.