In the preceding column we noted that the Standard Forms Committee of the California Association of Realtors® (CAR) has provided a nice solution for the problem (a nice problem to have) faced by a seller who has received multiple offers and who would like to make simultaneous counter offers to two or more of the prospective buyers. The "problem", of course, is that he needs to avoid having sold his house to more than one buyer, should two or more find his counter acceptable.
CAR added two sections to its 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 the seller has chosen.
Regrettably, some listing agents have found that these provisions can also be used in a misleading way, so as to - perhaps - create an atmosphere that is favorable to the seller. What they will do is to use the multiple counter offer provisions noted above, even though, in fact, there are no other counter offers being made. The point of this, of course, is to give the buyer the impression that he is in competition with some other buyer(s). And this is done in the belief that the buyer who believes he is in competition will be more likely to ‘up’ his offer, to pay more than he originally proposed - maybe even more than he ever thought he would go.
To be sure, that belief may be wrong. It is a gamble. Some buyers will say, "I don’t want to get into a bidding war," and will drop out altogether. Yet they might have responded positively to a straight-forward counter offer.
I don’t know whether creating an illusion of a competition is a useful strategy for the seller or not. I don’t suppose that anyone really knows. I just know that some agents - and probably some sellers too - think it is a good idea.
OK, so we may not know if it’s a good idea in the "useful-to-the-seller" sense; is it a good strategy in the other sense of good? No, I don’t think so. It is, after all, untrue. It is, in a word, fraudulent. Would it be actionable, as in "a fraudulent inducement to enter into a contract?" I don’t know. That’s one for the lawyers. No doubt it would be a highly fact-specific call.
I have heard agents defend the practice (of pretending that multiple offers exist) on the grounds that "another offer might come in, and we want to preserve the seller’s options." OK, I see the point. But you don’t need to fabricate a situation to do that. With respect to the CAR form, just eliminate the part that says that multiple counter offers are being made; and retain that which says that a second seller signature will be required in order for the accepted counter offer to be binding.
There are all sorts of ways to preserve the seller’s options. Deception need not be one of them. Tell the truth. That way, as Mark Twain has said, "you will gratify some, and astonish the others."