Wednesday, October 17, 2007

Buyers using Multiple Contracts at once?

Question:
Frank,
Question for you about an old blog entry earlier this year (your blog is great by the way). In it you mentioned that having more than ONE offer to purchase out at a time is unethical / illegal. While I agree it is somewhat difficult, I do not think it is illegal. Any offer can be withdrawn before it is accepted, and therefore assuming one is 'fast' they could negotiate multiple offers / counters at the same time and not withdraw anything until an offer is ratified. Of course the buyer runs the 'risk' of having two ratify so close in time that he / she does not get the others withdrawn. But I fail to understand how it is unethical or illegal to do so? Sellers and agents may HATE this of course. Do I have this right?
Joe

Answer:
Hey Joe.
DISCLAIMER: I am not a lawyer. This means you are to disregard anything that I say and verify it with a lawyer. Think of it as me giving you questions to ask them.

Ok, now that I've discredited the value of anything here forward... I believe that there might be something in contract law that requires that an offer be made in good faith, as in the buyer is going into the contract with full intent and i
s wanting to buy THAT place.
And the risks of two places saying yes, is actually pretty huge. With the gray area of what is "delivery" the buyer agent would have to nullify the other offers within seconds of receiving a ratified contract. I personally like to eat dinner,but one hour away from the fax could cost my client thousands.

Yes you might be able to use an "out" like HOA docs, but I believe you might have nullified the contract before that right begins if you have 2 places under contract with no intent to perform on BOTH.

I would have to get more details from a lawyer as to exactly what is legal.
As for ethical, I also believe the the Realtor's code of ethics precludes agents from doing that.

Anyhow, why not just put a 5pm deadline and make the 2nd other offer at 5:01pm? There is nothing wrong with that, and I do that all the time. Or you can make it nullify in an hour and tell them "technically the offer is no longer good, but you can still 'counter' by crossing off the deadline and sending it over." At that point it is a counter (even if the price is agreed to)
In other words
1) Buyers offer $500k for property 1 , deadline in 1 hour
2) Buyer waits 1 hour and puts in an offer on property #2 (after deadline on property 1 passes)
3) Seller of Property 1 signs 90 minutes later (signs, not "ratifies") contract. Maybe crossing off deadline, thus making it a "counter" technically
3) At THAT point, the Buyer:
a) Nullifies offer for property 2
b) Signs counter for property 1 to be RATIFIED

There are ways to do it like that, but I don't like having two outstanding offers, and I won't do it.

Now the quesiton should be "ok, give me HOW you CAN do it" (I hate "no" answers, I like "ok, tell me how I can effectively do what I want to do")

If you are an investor and disclose your intent to use multiple offers, you might be able to put "Purchase is placing offers on multiple properties. This offer is nullified upon acceptance of another offer" that MIGHT fly, but you would have to ask an attorney.

Make sure you subscribe to the blog and pass it on!
Thanks

Frank Borges LL0SA- Realtor/Broker FranklyRealty.com

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