Best way for buyer to protect private information when two offers are made on same property?

Asked by Captain Pat, Moving Tue Sep 25, 2007

We are buyers and made an offer with a contingency to sell our home. There was a second offer. We were told the other offer did not have a contingency, but ours was higher. We thought that if we removed our contingency we would get the house. Instead, they went to the other buyer and told them we removed our contingency, and that buyer raised their price. We were not given another chance to raise our price. I thought maybe it was an in house deal. My agent said the other buyer came from another company. I still think our offer information was revealed and we did not get a chance to come back with another bid. How should this have been handled and how do we make sure that it does not happen again?

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14
Deborah Madey, Agent, Brick, NJ
Sat Sep 29, 2007
BEST ANSWER
Hi Captain Pat,

If I were the seller’s agent in this transaction, I have a fiduciary duty to my seller to negotiate for the highest price and best terms for my seller. My seller is ultimately responsible for the choice of contract and decisions made. I also have an obligation to be fair and honest in my dealings with all buyers. I should not give one party an unfair advantage over the other.

I think your concern/complaint was that the other buyer (Buyer B) was given “round 2” and you were not. Here’s what we do not know……….Did the seller instruct his/her agent to take Buyer B’s offer? Did the Realtor recommend that the seller take Buyer B because of other strengths in the offer (large deposit, quick closing, etc.)? As a sellers agent with multiple offers, even if my seller voices their choice of contract, I advise the seller to make sure and let every buyer have their oppty to put their best and final offer on the table. This allows all buyers a fair oppty. A seller, still, can choose any buyer contract they desire, even if the price and terms of the chosen contract are not as strong as another.

In your case, you left the table with a permanent doubt that your contract might have been chosen, if you had been provided the oppty to go to “Round 2” as was Buyer B. Chances are, it was really just the sellers’ decision to end negotiations. It may have been a mutual loss; the seller lost the ability to collect a higher sales price and you lost the home you wanted. For some reason, the seller believed in the other offer.

Your question was how to avoid this from happening again. If your agent communicates early on that you ‘want another chance’, you will have told the seller that you are still willing to bend more. What is the seller was willing to accept? You would be selling yourself out. You can always request either a counter or acceptance each time you submit, or re-submit an offer. But, that still is not a guarantee that you will get the next chance. The seller does not have to comply with your request, but the sellers agent must pass on that request.

Sorry to hear that you lost this property. Many times things work out that the next one is better. We'll be hoping that to be true for you!

Deborah
0 votes
Ruthless, , 60558
Tue Sep 25, 2007
I believe the advice that Diane gave would be relevant if your offer had been accepted but not during the multiple offer negotiation time. An attorney will be of little help if there isn't a valid contract.
Ruth
2 votes
Ruthless, , 60558
Tue Sep 25, 2007
Hmmm. I'm not sure but I don't think your offer as a buyer is confidential. What the seller is willing to accept IS confidential. I had this exact situation happen to me. The rational on the part of the seller (as advised by the agent) is that you are still a greater risk of actually getting to closing. They already know that you need to sell your home, will the bank approve you if you don't? The way to make sure this doesn't happen again, it to not have the home contingency in the first place.

I, however, got a second chance in my situation. The first buyers backed out. They had made their offer under pressure of multiple offers. When the house came back on the market, there were multiple offers again. We removed the home sale contingency and knowing that we really wanted this house, we also offered $x amount more than any other offers (it might be $500 or $5000). I later learned that this is called an acceleration clause. I had never heard the term before and neither had my agent. It turns out that although the first time around our price was highest, the second time around it was not. Because we told them that our offered price wasn't our highest price, they came back to us instead of working with the other buyers. We got the house this time.
Good luck,
Ruth
2 votes
Jodi Strober-…, , Bucks County PA, Montgomery County PA
Tue Sep 25, 2007
You could ask your agent to present the offer in person. This shows the seller that you are really serious and willing to negotiate until you get the house.
1 vote
Jodi Strober-…, , Bucks County PA, Montgomery County PA
Tue Sep 25, 2007
Unfortunately, the world of real estate is not always fair. If a listing agent has multiple offers on a property, all details of all offers are shown to the seller and they choose what is best for them.

As REALTORS - we are obligated to follow a Code of Ethics which means that we are to deal honestly with all parties, but we are representing our clients, so the listing agent will always try to get the best deal for their client, the seller.

Removing the home sale contingency is good, but if you need to sell your house to get your next mortgage, your offer is still not very strong.

To make sure it does not happen again, maybe you should not make any more offers until your current home is at least under contract. Another option is to see if you qualify for a bridge loan, so if your current house doesn't sell you can still afford the other house (I don't personally recommend this to my buyers - but some people have no problem paying two mortgages.)

Finally, the best offer on a home is not alwaysthe highest price. when comparing offers there are many things sellers look at: Home sale contingencies, inspections, settlement date, good faith money etc.
1 vote
Dave Rivera…, Agent, Orinda, CA
Tue Sep 25, 2007
Hi Captain Pat,
I'm sorry to hear of your experience. Keep in mind that I can't know all the details, but from what you are saying, it sounds like the sellers received two offers and countered both of them. Was this all done verbally? If the counter offer from the sellers was in writing, there is a box they check to indicate that both buyers are receiving a counter offer (at least here in CA there is). That way the buyers know that even if they agree with the counter offer, they still may not get the house, because the other buyers have the same opportunity, and, obviously, the house can't be sold to both. If the counter offers were only verbal,
it is possible that the seller was playing the offers against each other to get more money, but there could
be many other factors involved. Too many to list, but, for example, perhaps the other offer was all cash,
maybe the other lender was known for getting the deal done, maybe the listing agent knew the other buyers agent had a stellar reputation for closing the deal, etc... As far as how to handle it in the future, aside from making sure that all offers/counters are in writing, just make sure you let your agent know to tell the other agent you want to be countered if there is another offer. Best of luck!
1 vote
Sylvia Barry,…, Agent, Marin, CA
Fri Oct 5, 2007
One of the ways to avoid the favorism in the future is to require confidentialiy of your offer before your offer is presented.

We don't usually ask for this because we assume our offers will not be discussed, but unless there is a written agreement, the seller can let anybody or everybody know the terms of your contract; so that's one way to keep the other side from knowing the terms of your offer..

Perhaps since your original offer is contingent upon the sale of your house; depending on how it was communicated, the seller might worry about the fact that suddently you don't need to sell your house anymore.

Since the tightning of the lending rules, sellers and listing agents are watching loan contingency and loan terms very closely. If I have to pick between two offers, similar, but one is much stronger financially, I might suggest to my sellers to consider that. Of course, this is total speculation on my part and I don't know the real reason bhind it, but it is possible. .

My suggestion to my buyers is always to give their best offer if they really like the house just so that they don't lose the house in this kind of situation.

Good luck next time.

Sylvia
0 votes
Captain Pat, , Moving
Fri Oct 5, 2007
Yes, Deborah, my complaint is that the other buyer was given a chance to modify their bid after being told the details of my bid. I was not provided that chance and was not told the details of their bid. The seller was not properly serviced by their agent because their agent purposefully helped the other buyer over me by giving them details of my bid. This allowed them to up their bid, but not me. If I was given equal opportunity and the seller chose another contract over mine, I would accept that. My complaint is not with the seller, it is with the agent for the seller engaging in unfair favoritism of the other agent and buyer. I have since found out that those two agents are very good friends. They work for different companies.
0 votes
Jolie Muss, , Upper West Side, New York, NY
Sat Sep 29, 2007
Captain,
I don't know what the laws are in your state and they really differ from state to state, but if you were represented by an agent, your new formal offer should have been sent by your buyer's agent to the listing agent and delivered to the seller by the listing agent immediately!
The listing agent may have had their own buyer and greedily, did not give your offer to the seller.....
(All offers must be submitted asap! This is in all states, I believe?)
Better luck on your next purchase, I think you got some excellent advice from my colleagues!
Web Reference:  http://myspace.com/nycexpert
0 votes
Patti Pereyra, , Chicago, IL
Tue Sep 25, 2007
Hi Captain Pat:

Sorry you lost the house!

You may have removed the contingency, but the seed was already planted in the sellers' minds. They now knew there was another home to sell, and even though the necessary sale was no longer part of the contract, the possibilities of anything going awry because of that was not a chance they wished to take.

So, since the other buyers raised their price and there was never any contingency with them, the offer felt safer -- more of a 'sure thing' -- giving the sellers more reason to accept that offer over yours.

Ethically, it's okay that the listing agent shared this particular detail with the other side; it is the art of negotiation and was part of the counter back to the 2nd buyer.

You won't know, however, just how much those buyers paid for the house until it closes. *That* is confidential info can only be revealed after escrow closes.

In the future, all you can do if you are serious about a house is to make your best and highest offer, especially in the face of multiple offers. As much as it's not what you wish to hear, really, the seller is in control and there is not much you can do apart from that.

Wishing you another perfect house!
0 votes
Diane Glander, Agent, Spring Lake, NJ
Tue Sep 25, 2007
Ruth,
You are right. I thought the first buyers' offer had been accepted when the second came in. That scenario is illegal in NJ when the first contract is out of attorney review. Thank you for making me take a second look!
Capt. Pat,
Unfortunately, sellers' decisions are not always outwardly rational. If they were completely happy with the second offer they could accept it and not offer you a counter proposal. Even in this market, some sellers do not want multiple offers to turn into bidding wars. Perhaps the second buyers were cash buyers, you just don't know. It is not fair, I agree, but there is really no way to avoid something like this happening again. Sellers have the final word as to whom they will sell their home and can refuse to negotiate with anyone once they find a deal they like.
Web Reference:  http://www.dianeglander.com
0 votes
Ruthless, , 60558
Tue Sep 25, 2007
Capt Pat:
Let me correct my statement, "They already know that you WANT to sell your home." It could just be a case of first impressions. Right or wrong, fair or unfair, that is the reality. The seller gets to choose who they want to negotiate with.

Sorry this happened to you. I would do as Jodi suggested next time as well as making your first offer a good impression.

Good luck,
Ruth
0 votes
Captain Pat, , Moving
Tue Sep 25, 2007
We do not need to sell to buy. We would rather not have to carry two mortgages and so we put in the contingency. We can get a loan without selling, but we would have to liquidate other assets and prefer not to. We made an offer and signed the paperwork. All discussions after that were verbal. Our agent said if we came to terms, we would make the changes in writing at that time. We would have been willing to go up in our price. We have excellent credit and removed our contingency. The house is 5 years old and in good condition but we still would not buy without normal inspections. We did not have anything weird in our contract that would make it unattractive except the contingency which we removed. I think the seller could have had a better contract with us but we did not get another chance. The other buyers did and I think it was unfair. How to prevent this?
0 votes
Diane Glander, Agent, Spring Lake, NJ
Tue Sep 25, 2007
I don't know what state you are located in, but this is how it works in NJ. When a buyer has a homesale contingency clause aka 72 hour kickout clause, that buyer must (when presented with the fact that there is another contract in without a homesale contingency clause) be given the option of removing the contingency clause (within 72 hours) and proceeding with the transaction, or lose the house if he/she cannot remove the contingency clause. There is no further bidding on this property. Either the first buyer gets it at their price when the remove the home sale contingency, or the 2nd buyer gets it at their contract price. Check your local real estate law with your agent and the company that represents the agent and get an attorney asap!
Web Reference:  http://www.dianeglander.com
0 votes
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