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Professional Standards Manual

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2. Acting For Sellers

(h) Offers

(i) Presentation of Offers

While many real estate boards/associations have rules on this topic, which are similar to the following guidelines, licensees are reminded that these are the minimum requirements. Board/association members should be familiar with their board’s/association’s procedures.

(ii) Attendance of Other Licensees

Unless the client instructs the licensee otherwise, there is nothing wrong with having the selling licensee who introduced the offer attend with the listing licensee and allow that selling licensee to explain the offer to the seller. While there is no real requirement to do so, it seems that the listing licensee and seller have nothing to lose by this procedure and it ensures that the selling licensee, who has introduced the offer, has a full opportunity to make the presentation.

When more than one offer is being presented, the listing licensee will allow only the licensee(s) who introduced the offer being dealt with at the time to be present.

(iii) Multiple Offers — Presentation Procedures

If more than one written offer on a specific property is made before the seller has accepted an offer, all written offers must be presented to the seller. The only exception would be if the listing licensee has specific written instructions from the seller on the listing not to present particular types of offers. Unless otherwise instructed by the seller, the listing licensee should ensure that any other representative involved knows there will be competitive offers.

**Alert**

Licensees should be aware that any written offers received prior to the Completion Date of an existing sale must be presented to the seller. If a seller wishes to consider a subsequent offer, the licensee should advise the seller to seek legal advice. This applies whenever the licensee acted as a seller’s agent in the first sale, and includes cases where the listing brokerage becomes aware of the possibility of a resale to a different buyer.

If the licensee acted as a buyer’s agent in the past sale, then he or she would not owe this fiduciary duty of disclosure to the seller but would be required to disclose any third-party interest to the first buyer.

(iv) Order of Presentation

If the listing licensee has more than one offer on a property ready to be presented, the first thing to do is to tell the seller how many offers may be presented so that there is no suggestion of accepting or countering an offer before all offers have been presented.

If there is any question about which offer should be presented first, the offers should be presented in the order in which they were received to avoid controversy. To minimize the significance of the order of presentation, the listing licensee should explain to the seller prior to the presentation of the first offer that there is a total of (so many) offers and they will be presented in the order in which they were received.

A licensee must always consider all expected agency obligations in offer presentations. An agent for the seller would be obligated to disclose that the buyer will pay more (if this is known to the agent). An agent for the buyer, or a limited dual agent, must not disclose that the buyer will pay more unless instructed to do so by the buyer.

After the seller has considered all of the offers, the listing licensee should advise the seller of the options available; i.e., the seller can reject them all, accept one, provide all buyers with the opportunity to submit new offers by a specific date with the understanding that there is a multiple offer situation, or counter-offer one of the offers. In discussing these options, the seller’s agent should discuss the relative merits and potential pitfalls of each.

Because countering more than one offer at a time is problematic and a potential source of lawsuits, the Council recommends that only one offer be countered at a time.

The Council advises that extreme care be taken when multiple offers over the listed price are received after short market exposure. In these situations, the seller may wish to consider refusing all the offers and inviting each of the potential buyers to submit a new offer. If this is considered, the seller should be made aware of the possibility that some or all of the potential buyers may not submit new offers.

(v) Referential Offers

In an environment of multiple offers, a listing agent might be presented with an offer containing what is generally referred to as a ‘‘referential purchase price clause’’ (RPPC). The RPPC is a means by which a buyer endeavours to establish a purchase price by reference to prices contained in competing offers. The thrust of the RPPC is for a buyer to piggyback on the next highest bona fide offer which is acceptable to the seller. Such a clause might read as follows:

The purchase price is $1,000 above the price offered in the nearest competing bona fide offer acceptable to the seller to a maximum price of $350,000. The seller agrees to provide a copy of such nearest competing offer on acceptance of this offer.

A 1985 House of Lords decision from the United Kingdom held that a referential offer is an offer which does not stand on its own and which is not understandable without reference to another bid. The House of Lords held that referential offers were invalid.

The B.C. Court of Appeal, in the case of The Bank of Nova Scotia and Yoshikuni Lumber, held that an offer by one bidder which is dependent for its definition on the offers of others is invalid and unacceptable, as being inconsistent with and potentially destructive of the very tendering process in which it is submitted.

In order to avoid potential problems, a listing agent should consider the following guidelines when confronted with an RPPC clause in an offer:

  • the listing agent should review the referential offer with the seller very carefully as it might not be the best offer with respect to other terms besides price, such as the financial qualifications of the buyer, dates and any subject to clauses;
  • if this offer appears to be the best offer, the listing agent should advise the seller to counter the said offer by deleting the RPPC clause and inserting a fixed price for an identical amount in its stead;
  • this counter-offer should be open to the buyer who presented the referential offer for acceptance before the expiration of any other offer the seller may be considering;
  • if the buyer in question accepts the seller’s counter-offer, then it is no longer a referential offer as it is a contract for a fixed price;
  • if the buyer refuses to accept the seller’s counter-offer by the time it is open for acceptance, then the seller is free to counter or accept another offer as long as it has not expired; and
  • the listing licensee should be aware that if acting as a limited dual agent for both the buyer who wishes to present a referential offer and the seller, the usual principles of dual agency apply and the licensee should ensure that both parties understand the limitations of the licensee acting as a dual agent.
(vi) Date of Final Acceptance on the Contract of Purchase and Sale

Many Contracts of Purchase and Sale drafted by licensees contain a clause that the deposit is due within a certain time after acceptance of the contract. Therefore, the final acceptance date becomes important as to when the deposit is due for deposit in the brokerage’s trust account.

Licensees should consider the following guidelines when drafting contracts of this nature. 

1. When the offer is initially made by the buyer, it will be open for acceptance until a certain time, for example, until midnight that day. This time should be inserted in the contract.

2. If, for example, the seller accepts all of the terms of the contract, except the price, the seller will usually sign and date his or her acceptance and then counter the price by crossing out the price and adding in a new price. The seller will then initial the change. The seller’s counter-offer is open for acceptance by the buyer until a certain time; for example, until noon the next day. This time should be inserted and initialed by the seller.

3. The buyer then reviews the seller’s counter-offer and decides to counter back to the seller with respect to the purchase price by crossing out the price and adding in a new price and initialing same. He leaves this counter-offer open until midnight, which time should be inserted and initialed by the buyer.

4. The seller then reviews the buyer’s counter-offer and decides to accept it. He should initial the buyer’s change in price and time for acceptance, if the time has been changed, then insert a date and time beside his initials. This becomes the final date of acceptance and starts the clock ticking with respect to the requirement for the deposit.

Licensees should ensure that the dates in the standard contract with respect to when the offer or counter-offer is open for acceptance are changed and initialed each time there is a counter-offer, as noted above.

Licensees should also ensure that the contracts are clear and legible so that there is no confusion as to the terms and dates.

Section 3-2(2)(b) of the Rules requires a licensee to immediately notify the managing broker if a deposit contemplated by an agreement has not been received.

Section 3-1(4) of the Rules requires the managing broker to ensure that all parties to an agreement giving effect to a trade in real estate are immediately notified if:

(a) a deposit contemplated by the agreement that, if received, would be held by the related brokerage as a stakeholder under section 28 of the Act has not been received, or

(b) a deposit cheque or other negotiable instrument that the brokerage received in respect of a deposit referred to in paragraph (a) has not been honoured.

Section 3-1(5) of the Rules requires that a Notice under subsection (4) must be given in writing or confirmed in writing.

(vii) Advice of Acceptance

Section 5-4 of the Rules provides that a licensee who has obtained a signed acceptance of an offer to acquire or dispose of real estate must promptly deliver a copy of the signed acceptance to each of the parties to the trade in real estate and to the related brokerage of the licensee.

(viii) Identical Offers

A listing licensee should recommend one of the following three methods of handling seemingly identical offers:

  • accept one;
  • accept neither; or
  • accept both (with the less desirable one as a back-up, subject to the collapse of the first contract).

There is nothing wrong with the seller simply accepting one of the seemingly identical offers. No two offers are truly identical because of the differences in buyers’ capacities, the seller’s personal preferences, and many other factors.

(ix) Counter-Offers

If none of the offers is acceptable to the seller and the seller counter-offers one of the offers, the licensees representing the other buyers may be told, with the consent of the seller only, that there is a counter-offer; neither the terms of the original offer nor the counter-offer should be disclosed unless instructed to do so by the seller.

(x) Revocation of Offers and Counter-Offers

An offer or counter-offer can be revoked at any time prior to acceptance. Though an offer can be revoked orally, it is critically important to have written evidence of the revocation, as it is for any delivery of documents. Revocation is not effective until received by the offeree (i.e., the person to whom the offer was made) or the offeree’s licensee.

(xi) Offers after an Offer Has Been Accepted (Back-up Offers)

Once an offer has been accepted but before the conditions have been removed, a back-up offer that is accepted by the seller sits in second position waiting for the first offer to collapse or firm up. Back-up offers should always have a clause such as the following written into the contract:

Back-up Contract Clause

Subject to the Seller ceasing to be obligated in any way under the previously accepted Contract of Purchase and Sale on the subject property on or before (date) .

This condition is for the sole benefit of the Seller.

It happens, at times, that the seller/buyer of the first offer may seek to renegotiate terms and conditions of the first offer. The listing licensee should counsel the seller to seek legal advice because renegotiations may result in activating the back-up contract. The risk is in selling the property to both buyers simultaneously! The licensee should advise the seller to obtain legal advice before changing the first offer when there is a back-up contract. The licensee should also advise the second buyer to obtain legal advice under the same circumstances.

Secondary or back-up offers frequently do not contemplate that the buyer may find another property and may wish to withdraw the back-up offer. Before preparing a back-up offer, the licensee should consult with the buyer as to what will happen if the buyer finds a more suitable property.

Licensees need to be aware that back-up contracts, while useful in some cases, can create serious problems when the contractual limitations and obligations of each party are not properly explained to all parties.

On the face of it, the intent is usually that a back-up contract will become firm and binding if the buyer under the previously accepted contract does not remove the subject to clauses by the date agreed to in the previous contract.

After conditions have been removed, but before completion, additional offers may be accepted as back-ups in sequence by the seller. Licensees should not stop presenting offers until transactions have completed. If a seller instructs the listing agent not to show the property after a transaction is firm, then the agent must obey these instructions, but the agent should advise the seller that firm sales can collapse before completion for a variety of reasons (death of the buyer or one of the buyers, loss of job, financial disaster, unforeseen problems with the property itself, etc.), and the seller is not protected until the transfer of title is complete and the money is in the seller’s hands.

(xii) Further accepted Offers after a first Offer Has Been Accepted (Back-up Contracts)

[11/03/2011 The following section was added to the Professional Standards Manual]

Licensees need to be aware that back-up contracts, while useful in some cases, can create problems when the contractual limitations and obligations of each party are not properly explained to all parties. For example, back-up contracts usually do not contemplate a circumstance where the second buyer finds another property and wishes to withdraw the back-up contract. Before presenting a back-up offer to a seller, the licensee acting for the second buyer should advise the buyer as to the buyer’s obligations to complete the transaction should the back- up offer be accepted and the original contract collapse. The licensee should refer the buyer for legal advice where the buyer wishes to withdraw an accepted back-up contract or where the buyer wishes to include a term in the offer which permits the withdrawal of the back-up offer after acceptance.

Once an offer has been accepted but before the conditions have been removed, a back-up offer that is accepted by the seller sits in second position waiting for the first contract to either firm up or collapse. In order to avoid sellers inadvertently becoming bound by two contracts, licenses acting for sellers should ensure that back-up offers include a clause such as the Back-up Contract Clause noted above.

The date in the back-up contract clause should be the date following the date for subject removal in the original contract and include the time of day upon which the back- up contract expires. It happens, at times, that the seller/buyer of the first contract may seek to renegotiate terms and conditions of the first contract. Where there has been an extension of the subject removal date in the original contract, the licensee acting for the second buyer should ensure that, if the second buyer wishes to continue to be in a back-up position, the back-up contract is amended prior to the time set out in the back-up contract, to reflect the new date of subject removal in the original contract and that amendment is agreed to in writing by the seller.

A review of the case law suggests that so long as the amendments proposed to the original contact are all of a character which affirms the original contract and there has not been a breach or gap in the intention to contact between the original parties, the contract remains in full force. (See most notably B.D. Mgmt. Ltd. V. Tajico Hldg. Ltd., 1988 CanLII 2932 BC C.A. where the BC Court of Appeal held that in a circumstance where the date of completion and possession was extended by two weeks by way of an Interim Amending Agreement, the parties “did nothing other than amend a contract in certain non-fundamental details while affirming the continuing existence of that contract”. In that case the parties had included a clause in the amending agreement which stated “all other terms and conditions contained within the said Agreement remain the same and in full force and effect.”)

However, any changes to the original contract should be approached with caution. If there has been a breach of the terms of the contract or a gap in the intention to contract so that contract has been brought to an end, the back-up offer may be activated. Licensees acting for the seller and first buyer should advise their respective clients to obtain legal advice before changing the first contract when there is a back-up contract. The licensee acting for the second buyer should also advise the second buyer to obtain legal advice under the same circumstances. Where the licensee is acting as a limited dual agent, the licensee should take care to ensure his or her impartiality.

Prior to completion of the original contract, additional offers may be accepted as back-ups in sequence by the seller. Licensees should not stop presenting offers until transactions have completed. If a seller instructs the listing agent not to show the property after a transaction is firm, then the agent must obey these instructions, but the agent should advise the seller that firm sales can collapse before completion for a variety of reasons (death of the buyer or one of the buyers, loss of job, financial disaster, unforeseen problems with the property itself, etc.), and the transaction is not a certainty until the transfer of title is complete and the money is in the seller’s hands. A prudent licensee would request that a seller put such an instruction in writing.

(xiii) Sale of the Buyer’s Property

In some cases, a contract may be written subject to the buyer selling his or her own property. Even if the clause provides that the sale is subject to the sale of the buyer’s property, by a certain date, the seller is forced to wait until at least that date before accepting another offer. To protect the seller, and permit the seller to be in a position to accept other offers, the seller’s agent should ensure that there is a provision which permits the seller to require that the buyer remove the condition within a prescribed period of time upon the seller giving the buyer notice. Such a clause is referred to as a time clause.

(xiv) Time Clauses

Time clauses should be inserted for the protection of the seller when an offer is written or received containing a subject to the sale of clause.

It is important to ensure that the time period is precisely defined (e.g., 72 hours).

Terms such as ‘‘banking days’’, ‘‘working days’’, ‘‘business days’’, etc., should be avoided.

Sale of the Buyer’s Property, with Time Clause

Subject to the Buyer entering into an unconditional agreement to sell the Buyer’s property at (address) on or before (date) .

However, the Seller may, (select either "at any time" or "upon receipt of another acceptable offer") deliver a written notice to the Buyer* or to (name of his or her representing real estate company) requiring the Buyer to remove all conditions from the contract within (number) hours** of the delivery of the notice, not to include Sundays and Statutory Holidays. Should the Buyer fail to remove all the conditions before the expiry of the notice period, the contract will terminate.

This condition is for the sole benefit of the Buyer.

 

* See sample following.

** The period usually ranges from 24 to 72 hours, depending on market conditions.

NOTE: This time clause may be adapted to fit other similar circumstances where the subject to clause is really an option. Examples include allowing time to obtain zoning approval, feasibility studies, engineering reports, etc. This clause protects both parties because the property is never completely off the market except for the designated number of hours between the invocation of the time clause and its deadline.

A clause such as the following should be used when a seller wishes to have the buyer with the first accepted offer remove all conditions or withdraw in order for an accepted back-up offer to move into first position. The circumstances for invocation will depend on how the time clause was written in the first offer, with either ‘‘at any time’’ or ‘‘upon receipt of another acceptable offer’’ being the reference to allow invocation.

Notice Invoking the Time Clause (for use with preceding time clause)

This document constitutes written notice from the Seller to the Buyer requiring the removal of (select either all conditions or the condition) from this contract within (number of hours) hours* not including Sunday or Statutory Holidays, or this contract will terminate at the end of the (number of hours)-hour period and the deposit will be returned to the Buyer.

This Time Clause will start running on delivery of this Notice to the Buyer or to (his or her representing brokerage) which will be at (time of delivery of notice) o’clock (select either a.m. or p.m.) on (date)Therefore, the (number of hours) hours will expire at (time) o’clock (select either a.m. or p.m.) on (date).

* Fill in the same number of hours as in preceding clause.

NOTE: When there is a time clause in the first offer and in the second offer, if the offers are not handled carefully, the Seller could lose both offers.

NOTE: The licensee should obtain evidence of the time of delivery as it may be necessary to prove this in the event of a dispute.

(xv) Listing and Offer Guidelines

When you are preparing, presenting and negotiating offers and counter-offers, follow these principles. Click on each of the statements below to see recommendations for handling offers.

Show/Hide Answer Open All 

Guiding Principles for Offers and Counter-Offers

 

Show/Hide AnswerCommunicate early and often

When you take a listing or begin working with a buyer, explain to the client how offers and counter-offers are handled.  If competing offers are a possibility, discuss strategies.

Show/Hide AnswerThe licensee advises — the client decides

The clients are the ultimate decision makers.

A seller makes the decisions about how and when offers will be negotiated and if they will be accepted, rejected, ignored or countered.

A potential buyer makes decisions about when his or her offer will be written. Based on the licensee's advice and the buyer's decision, the duration of the time the offer will be open for acceptance must be considered.  A potential buyer can accept, reject, ignore or counter any counter-offers received from a seller.

All offers and counter-offers must be presented to the seller and the potential buyer, as the case may be.

Show/Hide AnswerOffers 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. It is critically important to have written evidence of the revocation.

Show/Hide AnswerDisclosure of terms of offers and counter-offers

A listing licensee may not disclose the terms of an offer or counter-offer from one potential buyer to another potential buyer without the prior consent, preferably in writing, of the seller.

Some real estate boards may have bylaws that prohibit the disclosure of the price and terms of a competing offer.

If the seller has agreed with a buyer to maintain the confidentiality of the price and terms of an offer, no information may be disclosed. A seller who is not bound by a confidentiality agreement with a buyer may decide that a better offer could be obtained by disclosing the terms. Should this occur, the listing licensee is obliged to follow the lawful instructions of the seller.

Show/Hide AnswerFull-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 seller is not obligated to sell the property even if a buyer makes a full price, unconditional offer.

Show/Hide AnswerNo priority to offers

The first or highest offer made does not bind or otherwise limit the seller to act upon any offer before considering any other offers.

Show/Hide AnswerLicensee communication

Licensees should make reasonable efforts to keep cooperating salespersons informed, consistent with client’s instructions.

Show/Hide AnswerLicensees are not lawyers

Licensees should advise clients to seek legal advice regarding any questions about the legal status of an offer or contract.

 

 

The Seller Client — An informed seller will be ready to make the right decision when an offer or competing offers are received.

When taking the listing:
  • Discuss with the seller their motivation for selling. Remember, this is confidential information.
  • Discuss impact of current market conditions, e.g., season, types of financing, length of time on market.
  • Review Guiding Principles.
  • Explain that competing offers may be received and that the seller decides whether to disclose the existence and/or terms of offers to other licensees and/or buyers.
  • Confirm that the seller — not the licensee, will make decisions about how and when offers will be presented, negotiated and ultimately accepted or withdrawn.
When the offer is received:
  • Advise the seller of the receipt of the offer(s).
  • Promptly present the offer(s) unless otherwise instructed (preferably in writing) by the seller.
  • Discuss the terms of the offer(s) — if competing offers, compare terms.
  • Inform seller of any other interest in the property.
  • Potential of other offers.
  • Scheduled showings.
  • Recent showings that may require follow-up.
Seller’s options — one offer:
  • Accept, reject, counter, delay during time for acceptance to seek out other offers.
  • Explain pros and cons of each option — including the potential of a buyer withdrawing an offer during a delay.
Seller’s options — competing offers:
  • Accept one offer.
  • If an offer is accepted, the seller may also accept back-up offers.
  • Reject all offers and encourage better offers.
  • Counter one offer (may withdraw counter, in writing, prior to acceptance) — do not inform other buyers.
  • Delay acceptance waiting for another offer.
  • Ignore an offer or all offers. The seller is not obliged to respond to potential buyers.
  • Alert one or more buyers that they are in a competing offer situation.
  • Alert all buyers that they are in a competing offer situation.
  • Do not alert any buyers that they are in a competing offer situation.
  • Consider the pros and cons 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.

 

The Buyer Client — An informed buyer will be ready to make the right decision when making an offer.

When working with a buyer as that buyer’s agent:
  • Discuss with the buyer their motivation for purchasing. Remember, this is confidential information.
  • Discuss current market conditions, e.g., season, types of financing, average length of time for properties on the market.
  • Review Guiding Principles.
  • Explain that competing offers may be made — realize that in a competing offer situation only one offer will result in a sale and one or more buyers may be disappointed.
  • Explain that the seller is not obligated to acknowledge, counter or reject an offer and may inform other buyers of the existence and/or terms of an offer to obtain better terms or price; or may not accept any offer.
  • Confirm that the buyer — not the licensee, will make decisions about how and when offers will be negotiated and presented or withdrawn.
When the offer is made — discuss with the buyer the possibility of competing offers:
  • Initial offer may be the only opportunity to buy.
  • Sellers may choose not to inform buyers of the existence of other offers.
  • Seller has the right to choose to negotiate with only one buyer at a time and not reveal this to other buyers and this negotiation may continue until seller accepts an offer.
  • The terms of buyer’s offer may not be treated confidentially by the seller, or the seller’s licensee acting upon the instructions of the seller, and the price and terms contained in the offer may be communicated to other buyers to obtain better terms or price.
  • If the buyer wishes the terms and conditions of his or her offer to remain confidential, the buyer can require the seller, prior to the presentation of the offer, to sign a confidentiality agreement. If the seller refuses to sign such an agreement, the buyer can decide whether the offer is to be presented regardless.
  • Seller may accept an offer on terms other than the price.
  • All buyers may be notified to present their highest and best offer — buyer may choose to:
    • make better offer
    • leave original offer
    • revoke offer in writing if period for acceptance is current.
(xvi) Confidentiality of Offers and Counter-Offers

A buyer and seller may enter into a confidentiality agreement prior to the presentation of an offer whereby each would agree not to disclose the terms and conditions of any offer or counter-offer to another buyer interested in the property.

Such a clause would need to be signed as a part of a separate document from the Contract of Purchase and Sale before the offer is presented.

The Council recommends the following clause where buyers and sellers wish to enter into such an agreement:

Confidentiality of Terms Clause

The Buyer and Seller agree that the terms and conditions of any offer or counter-offer with respect to the property located at(address) shall not be disclosed to any other potential Buyer of the property without the prior written consent of the Buyer and Seller.