‘Hot’ Real Estate Market Ignores the Usual Slow Season : Multiple Offers Please Sellers but Complicate Deals
When Victor and Marcia Volinecs put their two-bedroom, one-bath Northridge home up for sale last September, they figured it would take only a month to sell.
After all, they reasoned, the housing market is strong, interest rates are down and their particular home--listed for $94,950--was priced a few thousand dollars below other houses in the neighborhood.
About 60 realtors showed up for the brokers-only open house on a Friday, the first day it appeared in the multiple listing service. Within hours, says the family’s broker, John O’Rourke, an agent from another firm phoned to say that his client wanted to make an offer on the Volinecs’ home.
On Saturday, says Victor, “there were hordes of people” touring the house. Another realtor phoned O’Rourke to say his client wanted to make an offer on the property. By Sunday--less than 48 hours after brokers first saw the home--four realtors were sitting in O’Rourke’s office, anxiously waiting their turn to present an offer to buy the home.
Plenty of Confusion
“I thought the place would sell pretty fast, but this was phenomenal,” says Victor. “We actually got $2,550 more than our asking price.”
Stories like the Volinecs’--of quick sales, multiple offers and bidding wars--are now commonplace in many areas across the state. But while that’s good news for sellers and realtors, it’s also causing plenty of confusion and, in some cases, legal problems for homeowners and realtors alike.
Ironically, many homeowners wind up selling their home twice, and they don’t even know it. Then it’s a case of “what you don’t know can hurt you,” says one Westside broker.
The broker, who asked not to be named, said he was recently involved in a situation where his client--the seller--was offered $165,000 for a home that was listed for about $170,000. The seller made a counteroffer to sell the house for about $168,000.
Signed on Dotted Line
The potential buyer didn’t respond immediately, but later that night a new buyer offered to buy the home for the full $170,000. The seller agreed and signed on the dotted line.
An hour later, the broker said, “the agent for the first guy called up and said, ‘We’ve got a deal--my buyer will take it for $168,000. He signed the counteroffer a couple of hours ago.’ ”
So who gets the house? Fortunately for the Westside broker and his client, the buyer who accepted the counteroffer for $168,000 gracefully bowed out of the deal and hasn’t taken the matter to court.
More than likely, legal experts say, the first buyer wouldn’t have won if he had sued. But he might have succeeded in tying up the matter in court for several months--long enough for the second buyer to get frustrated and try to back out of the deal. And, of course, “everybody would have had to spend a lot of time and money on lawyers,” the broker adds.
Received Complaints
Problems arising from multiple offers are giving a lot of people headaches.
Broker O’Rourke, who also chairs the San Fernando Valley Board of Realtors’ grievance committee, says his panel has received several complaints from realtors this year who felt that fellow agents improperly handled situations involving more than one offer for a single piece of property.
And at the California Assn. of Realtors’ Los Angeles headquarters, says CAR managing senior counsel Stephen A. Groome, lawyers working for the trade group have been swamped by calls from members across the state who are uncertain how such situations should be handled.
“If we were in a normal housing market, we wouldn’t be having these problems,” says Bob Adamson, the Valley board’s executive director. “But when you have a market that’s as hot as this, it’s not unusual to get two, three or four offers for the same property. And that’s where you can get into trouble.”
Set Up Guidelines
Realtors in the Valley were so confused that the board organized a task force to draw up guidelines for homeowners and agents who are involved in multiple-offer deals. Although the board can’t force people to adhere to the guidelines, following the suggestions may prevent unnecessary confusion, delays and court battles.
According to some legal experts, the best way to handle a situation in which more than one person wants to make an offer on a house is to have all the buyers or their agents convene in the seller’s home or agent’s office.
Generally, it’s best to pull each of the buyer’s realtors aside and listen to their offer individually. If the seller wants to accept one of the offers, the other agents should be told immediately.
Things get really sticky when the seller doesn’t like any of the offers, and wants to make a counteroffer to more than one of the potential buyers. This is where the seller runs the greatest risk of “selling the home twice,” because it’s quite possible that two or more buyers will accept the terms of the seller’s counteroffer.
Task Force Suggestions
Sellers and their agents may be able to avoid this problem by following three simple suggestions made by the Valley board’s task force.
First, the task force recommends, the seller should write out the counteroffer and include a clause that informs the potential buyer that a counteroffer is being made to more than one person. In addition, the counteroffer should include another clause that says the counteroffer isn’t valid unless it’s signed by the buyer within a certain time frame specified by the seller.
Finally--and perhaps most importantly--the seller should also include a clause in the counteroffer that says the counteroffer isn’t valid unless it’s signed by the buyer and later acknowledged by the seller in writing . In effect, this clause gives the seller the final say over who gets the property.
O’Rourke and some other realtors who have been involved in multiple-offer situations say following those three pointers has helped them avoid potential problems.
Using Loopholes
Not all Valley realtors, however, are happy with the board’s new guidelines. Their primary complaint is that it allows a seller to back out of a deal simply by refusing to acknowledge the buyer’s acceptance of the counteroffer--even if the buyer agrees to all of the seller’s terms.
With the Valley’s hot housing market, a few sellers have reportedly used this loophole as a way to cancel deals they had reached earlier. Some of those sellers were hoping to trigger a bidding war for their homes or wanted to put them back on the market with a higher asking price.
Although those sellers might eventually get a slightly higher price for their property, they also run the risk of alienating brokers and potential buyers.
“I don’t like to take my buyers into a bidding war,” says Richard J. Rosenthal, a Venice broker and CAR president. “Unless it’s their ‘dream house,’ I tell them that we should probably look somewhere else.”
The seller might also wind up owing his agent a sales commission even if the home wasn’t sold, because the agent had fulfilled his part of the bargain.
Call for Advice
Still, there’s no denying that a homeowner who gets more than one offer for his property is in the driver’s seat. Not only can he play the buyers off one another to get a better price, but he can also “eyeball each offer and pick the most qualified buyer,” Rosenthal says.
Sellers who don’t use the services of a real estate agent may want to call an attorney if they’re involved in a multiple-offer situation, says Larry Alamao, an attorney for the California Department of Real Estate. If the seller is represented by an agent, he adds, the agent must notify the seller of any offer on the property unless the seller had told him not to do so.
Agents who belong to CAR can simply call the trade group’s lawyers to get free advice over the phone, according to Groome, the CAR lawyer.
Of course, following the Valley board’s guidelines or seeking professional advice is no guarantee that a party in a multiple-offer situation won’t take the matter to court. As Groome notes, “anybody can sue anybody over anything.”
However, he says, sellers and agents who carefully handle such situations may be able to avoid the old good news, bad news scenario some brokers have recently shared with their clients.
“The agent says, ‘The good news is that we’ve sold your home,’ ” says Groome. “ ‘The bad news is that we’ve sold it twice.’ ”
