Understanding the delayed offer presentation process

Delayed negotiations, used appropriately, can be a powerful tool when it comes to selling a home. Done right, this tool is a plus for buyers too.

So how do you know if delayed negotiations are right for you?

First, talk to your real estate agent. It’s not always the best option but your agent will know if you are listing the right type of property. They will also have the inside scoop on whether the current market is suitable for this negotiation tactic. The best fit is going to be a desirable property in a hot market.

Much of the recommendation is going on a gut decision based on experience — preferably lots of experience! A good agent knows fairly quickly whether a home will draw a lot of attention. For instance, maybe they know the price will draw a crowd. The home may also be in a coveted location. Or, perhaps the property is a style of home that’s hard to find and in high demand. When listing a property, we take the time to educate our sellers. Then, they will evaluate whether delayed negotiations are a good fit for their property.

For example, let’s say a property is a good fit for delayed negotiations. In this case, there are benefits to both sellers and buyers:

• Buyers have a better chance of getting in to see the property before it goes under contract.
• Buyers have more time to carefully think about what to include in their offer. Although there may be other offers, everyone is on a level playing field for the deadline. You CANNOT accept an offer before the delayed negotiation date.
• More buyers seeing it can lead to more offers.
• More offers and a deadline can increase other offer amounts as well as create more favorable terms for the seller.
• In many cases, this produces an accepted offer faster, meaning you won’t have to show your property repeatedly for weeks. It condenses most of the showings into one chunk of time.

MLS® Rule 8.2 – Sellers’ instructions on delayed offers – explained

** IMPORTANT: In delayed offers listings (which may not exceed 14 days), the seller must not accept an offer PRIOR to the Offer Presentation Date/Time noted in the Public Remarks of the Listing.

Sellers have three (3) options if they decide to move forward with a delayed offers strategy. This is how REALTORS® must proceed to comply with OREB’s MLS® Rules, the REALTOR® Code, and REBBA 2002 Code of Ethics:

Situation 1: “No conveyance of Offers prior to [date/time]”
This is straight forward! This means that the seller has instructed that they WILL NOT review pre-emptive offers. In fact, REALTORS® will not communicate the existence of any offer in advance of the agreed to date/time.  REALTORS® should have explained the pros and cons. While RECO says REALTORS®  have an obligation to convey offers, it also says: “They must act in strict accordance with the instructions they are given, so it is crucial that the written direction is detailed and very clear, and that it is given by a client who is fully informed about the implications”.
https://www.reco.on.ca/registrars-bulletin/written-directions-multiple-offers/

Situation 2: “Offers to be presented at [date/time], however Seller reserves the right to review and may accept pre-emptive Offers”  This means the seller wants to delay offers but would like the REALTOR® to let them know about pre-emptive (or “Bully”) offers.

Situation 3: “No conveyance of Offers until [date/time] subject to exceptions or conditions”
In this situation, the seller WILL NOT review pre-emptive offers UNLESS they contain a specific term (e.g. $50k over asking). Please keep in mind, if a buyer rep asks the REALTOR® for the specific term, they MUST provide the details.

Legal obligation to convey offers

The law is clear that a seller’s representative must convey an offer to the seller as soon as possible unless the seller has given clear and detailed written directions to do otherwise. A representative whose seller chooses to defer their consideration of offers to a specific date and time may do so only if the seller provides specific instructions documented in a written direction.

Written directions key steps

A REALTOR® must follow a client’s lawful instructions, so it is crucial that a seller is able to make informed decisions that are documented in a clear, specific written direction. A REALTOR® is expected to advise and inform a seller, ideally in writing, of the benefits and risks of delaying the presentation of offers or applying other offer conditions, and options for managing offers that do not comply with the seller’s written and express conditions.

The following are the key steps for REALTORS® to get informed instructions in the form of a written direction from a seller when considering a delayed offer presentation process.

Step 1: Explaining the benefits and risks of delaying offers

When discussing marketing strategies with a seller, a REALTOR® must clearly and thoroughly explain the benefits and risks of each strategy, and that no strategy is guaranteed to return the highest sale price. When explaining the option of delaying the presentation of offers, the benefits and risks should include at least the following:

Benefits

• • More exposure: The strategy may give buyers time to evaluate the property. This could generate interest from a greater number of buyers and a buildup of anticipation for the property as the offer presentation date nears.
  • Competing offers: More interested buyers may result in multiple offers.
  • Better price and terms: More competition could result in a higher price and desired terms for the seller.

Risks

• • Buyers don’t want to wait: The seller risks losing out on motivated buyers who don’t want to wait for the offer date.
  • Buyers averse to delayed or competing offers: Some buyers are averse to the delayed process. Buyers may shy away from situations that are perceived by them as unfair or tilted in a seller’s favour.
  • Strategy doesn’t generate offers: The offer date could pass without any offers, which might make the property less desirable, appear overpriced and remain on the market longer than expected.

Step 2: Explaining that a delayed offer presentation might lead to pre-emptive offers

When explaining how a delayed offer presentation strategy works, your REALTOR® should advise the seller that in an active market, a delayed-offer approach may prompt some buyers to submit pre-emptive offers. Pre-emptive offers often expire before the delayed offer presentation date in an effort to avoid, or pre-empt, the established offer process. A seller’s written direction must explicitly outline how the representative is to manage pre-emptive offers.

Note: See step 4 for instructions on documenting written directions and RECO’s bulletin, Managing pre-emptive offers.

Step 3: Obtaining written directions on how the seller wants to handle pre-emptive offers

It is important for a REALTOR® to help the seller understand the options for handling pre-emptive offers so they can make an informed decision about the direction they will provide.

Step 4: REALTORS® must document the seller’s instructions with clearly written directions

Once the seller understands their options and is ready to provide informed instructions, the REALTOR® will summarize the instructions in a detailed written direction for the seller to sign. The direction must clearly outline all the instructions the seller has provided with respect to various pre-emptive offer scenarios and how they are to be handled.

Step 5: Communicate the delayed offer presentation date and other necessary information to buyers

The effectiveness of a delayed offer presentation strategy depends on communicating the delayed offer presentation date and time to buyer representatives and unrepresented buyers. This is most commonly done by advertising on local real estate board multiple listing services and other online selling platforms. The information should be sufficiently detailed to communicate the seller’s presentation date and time and any other important details to support the seller’s strategy.

Change in seller directions

The seller can change their written directions at any time, but the new instructions must be documented in a new written direction. For example, if a seller who previously directed that they did not want to see pre-emptive offers decides they now want to consider pre-emptive offers, a new written direction needs to be made to override the previous direction.

If the seller changes their written direction, the REALTOR® is required to immediately take the following steps:

• • Update the notes to any local real estate board listing and other online selling platforms for the property to accurately reflect the current written direction for offer presentations.
  • Notify in writing anyone who has expressed an interest in the property of the change to the offer presentation date and time. If using some form of automated notification system, the registrant should confirm the contact information and delivery of the notification to the necessary parties. The seller’s representative is responsible for making sure all interested parties are notified of the change. In addition to traditional forms of written notice, text message and email are also acceptable.
  • An expression of interest (interested parties) includes parties who may have:
    1. 1. booked upcoming appointments
       2. viewed the property (showing or open house)
       3. informed the brokerage or the listing representative that they will be submitting an offer on the property
       4. submitted an offer

These steps are followed to be fair to buyers and their representatives and to act in the best interest of the seller. Why is this notification necessary? The aim of delaying offers is often to generate interest in the property. This is why it’s in the client’s best interest to inform those who may have shown interest in the property of any change to the offer presentation date or process so they may deliver their offers on time. It is also essential that the REALTOR® is promoting a fair and transparent offer process that ensures that as many buyers as possible have an opportunity to submit offers.

Relevant legislative sections

Code of Ethics: Section 3, 4, 5, 24, 37, 38, 39

REBBA 2002 CODE OF ETHICS: Section 3, Fairness, honesty, etc.
A registrant shall treat every person the registrant deals within the course of a trade in real estate fairly, honestly and with integrity. O. Reg. 580/05, s. 3.

REALTOR® Code
A REALTOR®’s ethical obligations are based on moral integrity, competent service to clients and customers, and dedication to the interest and welfare of the public.