If you’re buried in offers (usually a good problem to have), this webinar covers some key points to know to stay out of trouble. (We talk with an attorney in Nevada, but her suggestions may apply to your state as well. Be sure to review your own state regulations.)
- Nevada Revised Statutes 645.254(4) states that, “A licensee who has entered into a brokerage agreement to represent a client in a real estate transaction shall present all offers . . . as soon as is practicable . . .”
But what if you have 20 or more offers on a property? Learn how to handle presenting those offers to your sellers, without overwhelming them and meeting their requirements for a sale.
- Nevada Administrative Code 645.632 states that “. . . if the seller does not accept an offer . . . after an offer has been presented to the seller, the licensee shall provide to the buyer . . . written notice signed by the seller which informs the buyer that the offer has not been accepted by the seller.”
But how do you handle rejections when you have so many offers to deal with?
Learn what to do ̶ and not to do ̶ when returning rejected offers, and some options for dealing with rejecting multiple offers on a property. This webinar will also address the problems with setting deadlines for accepting offers.
Watch the webinar, listen to the podcast, or read the transcript below:
Safer Practices for Rejecting Real Estate Offers
Thank you for joining us today for Safer Practices for Rejecting Real Estate Offers in a hot sellers market. I’m Laura Prouse with CRES. Today we welcome attorney Kathryn Holbert from Farmer Case and Fedor. Kathryn has been defending real estate professionals in Nevada for more than 15 years and is a very active member of our CRES legal panel.
Along with Kathryn, we have Dave Miller, regional vice president with Fidelity National Home Warranty. Dave manages the CRES Advantage Home Warranty Plan. As a CRES real estate E&O member, when you deliver a CRES Advantage Home Warranty to your seller, you also give your seller $25,000 in Seller’s E&O Protection. And you reduce your own out-of-pocket claims costs by up to $5,000.
Well, thank you, Laura. Thank you Kathryn, for being here. Kathryn, can you just give us a quick summary of how hot the market is in Nevada and some of the challenges real estate professionals are facing?
It’s an extremely hot seller’s market. The inventory is very low with multiple offers on every property. Everything is selling above list price, above appraisal price. Of course, cash offers are preferred.
And by multiple, I don’t mean five or 10, I mean 20, 40, 50, 60, a lot of offers. And as you’re dealing with those, whether you’re representing a buyer, trying to get an offer accepted or you’re representing sellers that are happy to deal with these many and multiple offers, it can raise issues in communication and, properly responding to all of those offers that come in.
All offers need to be presented to your seller in some manner
With these hot markets come a lot of complications, and I’m sure you’re seeing that in the real estate transactions. Let’s talk about safely rejecting offers. Can you talk to some of the statutes that involve real estate professionals and when they have to reject those offers? (Be sure to check your own state’s statutes to confirm the regulations in your state.)
It’s an interesting interplay of several different rules. I guess that the primary role that most agents are familiar with would be their statutory duties under Nevada revised statute 6454, which states that, “The licensee has a duty to convey all offers to their client.” So, if you’re representing a seller, you absolutely have to convey all offers to the client. That of course is interesting.
If you’ve got one offer, you send them the offer, you talk about it, you decide if you want to accept it or reject it. If you have 50 offers, your client doesn’t want to see 50 offers. They don’t want to go through them. They aren’t able to go through them. That’s why they’ve hired you. You’re the expert. What I’ve seen and recommend is a summary spreadsheet. So, you don’t necessarily have to send them every single offer.
And, of course, sellers don’t have to go through every offer. They may decide, “I don’t even want to look at anything that’s not a cash offer.”
In that case, you set aside the ones that aren’t cash offers and use a spreadsheet to compare the cash offers that have come in. The key factor is the seller has to review the primary terms, i.e., the significant terms of each offer.
Let’s assume that a home does have 30 offers on it. Who’s doing the checks and balances there so that every single offer is responded to? You don’t want to miss one. That could cause a lawsuit or a violation of a code or a statute
Absolutely. And of course, it starts with communication with your own client. When you’re representing the seller:
- What are they looking for?
- What are the important terms for them? Are they looking for a quick close?
- Are they looking to stay in the market now? It’s hard to find another property. I’m hearing more and more about people negotiating to stay in the property after the close of Escrow, because they don’t have anywhere else to go.
So, it starts with knowing what’s important to your client and then giving them the offers that best fit that. You’ll want to discuss those offers in detail, while still telling them we have these other offers that have come in. And so they need to be at least aware of all of the offers that have come in, and they should be aware of the specific terms of those.
But they don’t necessarily need to be aware of the details of each one.
Rejecting offers in writing
The other interesting code that comes into play is the administrative code, NRS or admin, administrative code 645-363.2 that requires that offers be rejected in writing.
The very best thing to do is complete a rejection form for every offer that comes in. In Nevada, we have two different basic form offers (one used in the North, one used in the South).
- From a contractual standpoint, the contractual law doesn’t require a rejection. If an offer is not accepted, it’s automatically deemed rejected.
And both of the offer forms say that. However, they also both provide a space for you to actually reject the offer and return it. And really the administrative code is what requires that to be filled out. So, the most appropriate thing is to have your client sign on every single offer, and sign/initial the entire offer, which I think the one in the South is 13 pages.
The one in the North is like 10 pages and sellers are supposed to initial every single page, and then sign the back of it. So, it’s kind of a hassle to do it.
Of course, it can be a problem if you’ve got 50 offers that need to be rejected.
And now you or your assistant has to spend multiple hours, prepping all of these for signing and sending them out.
And you’re spending a lot of time rejecting offers and that, of course, isn’t going to make anybody any money. However, the code requires that it be done.
But, what I’m seeing a lot of and what the division has been seeing a lot of, is people are just signing the final page of the contract and sending just the final page back where it says rejected.
The division has actually come out and said, “please don’t do that.”
And I say, please don’t do that because you should never return part of a contract; either return the whole thing or don’t return the whole thing. And actually the code doesn’t require that the contract itself be returned.
So, if you just want them to sign one quick form, create a separate form that just says,
“I seller have reviewed the offer that was submitted by such and such person on such and such date and I hearby reject it.”
That’s the single page form you can create and return to the buyer, but don’t return just one page of the contract.
Even that could be time consuming. If you’re doing 50 of those that have to be set up, it can be acceptable to send an email to your seller.
- Send your client an email saying basically, as per our discussion of the 50 offers that came in, you have decided to accept blank offer and reject all others.
- And the seller sends that email back in writing and confirms, “yes, I’m rejecting all offers except for this one.”
- As the seller’s agent, you can send an email to all of the other offers and say your offer has been rejected.
The purpose of the administrative code is to make sure that buyers that submit offers know that their offer has been rejected. You don’t have to tell them why, but they do need to have some communication that their offer has been rejected, so they can move on and try to do something else.
Sometimes those offers may be kept as backup offers. If somebody gets the generic email that says, “Your offer’s been rejected,” and they write back and say, “Can you please have the seller sign?” the entire offer and send it rejected, go ahead and do that. If you need to do one or two versus 50, you’re much better off.
I can imagine you would not want anybody who rejects an offer to say why, because that would be very dangerous.
Very dangerous. Don’t get into any details. It could simply be, “there was another offer that better fit my client’s needs,” or something like that. Absolutely don’t want to get into any details as to why.
Managing in-coming offers with a deadline
Let’s say you’re taking in 30 or so offers. And as soon as you create your spreadsheet, another five offers come in.
I saw at one time where agents would say, “All offers are due by next Thursday. And then we’re done.” Is that a good practice? Or is that something that you would advise against?
You have to be careful. I wouldn’t advise saying, “We’re not accepting any offers after that day,” because you have to look at them if they come in. You can say that we’re not looking at any offers until like Thursday morning at 10:00 AM.
So, if you’re putting the listing on the MLS Monday morning, and your client just wants to wait and look at all offers (that have come in) on Thursday morning, then you need to put that in the remarks.
Here’s a problem that could come up: if somebody submits an offer on Monday, and they want a response deadline by Tuesday, what happens? You have to look at the offer, because you can’t just let the response deadline go.
You need to be very careful and put it in the agent remarks:
“We are looking at offers Thursday morning. Please make sure that your acceptance deadline is Thursday at noon” or something like that.
However, if you say, “Please submit your offer by Thursday at noon,” and you get an offer at 12:30, to comply with NRS 6452544, you have to give that offer to your client.
So, you have to present all offers regardless of when they come in. You can’t say to anybody, “It’s too late, I’m not passing this offer along.” You have to convey all offers.
Of course, once your client has actually accepted an offer, then you can just respond to offers that come in with: “my client has already accepted an offer. However, I’ll let them know that this has come in.”
And of course, you should be immediately changing the listing on the MLS to show that it’s under contract. Hopefully, that will stop offers from coming in, once agents see that the property is already under contract.
You had mentioned earlier about the Northern Nevada and Southern Nevada purchase agreements. Do those expire?
Both of the documents have a provision that says, “If this offer is not rejected by ______ (the agent has to fill in a specific date and time), it automatically expires.”
But, you can accept or counter an offer that’s expired. If you’re doing that, you have to make sure that your acceptance or counter offer has a term in it that extends that deadline, because technically under contract law, it’s now a dead contract.
So you both have to agree to revive the offer before you can carry on, but you can do that. Both parties can say, “Hey, we hearby agree that the acceptance deadline under the original offer is hereby extended to ___ (on a new date and time that allows for the counter offer,” etc.
What to remember about rejecting multiple offers
The absolute best practice is to initial every page, sign the offer rejected, and then return the entire offer.
If you’re buried in offers, though, you can consider other options.
You never want to be in a position of telling the Real Estate Commission, a judge, or a jury,” I didn’t have time to do it right.”
So, you’ve got to think, “is there a way that I can do this and still meet all of my obligations without having to return every offer?”
- If you simply have too many offers to handle any other way, in that case, you can use just a one-sheet form. You’re doing it for every single offer, and your client is signing the statement for every single offer. “I seller reviewed this offer and hereby reject it” and sign it.
- Next best scenario would be creating an email, “I’m accepting this offer and hereby rejecting all other offers” and then seller is signing it. That satisfies the written requirement. You’ve got documentation that the seller gave you in writing a rejection of all other offers. Then, you’re sending an email to everybody saying that, “Your offer has been rejected.”
Thank you, Dave. Thank you, Kathryn. And thank you for joining us today.