Andrew Wetzel's Musings

August 5, 2019

The PAR Listing Contract, Paragraph 13: ADDITIONAL OFFERS

Filed under: Buying,Ethics,Hiring an agent,Marketing,Multiple Offers,Price,Selling — awetzel @ 3:09 PM

I created and am teaching a class on representing sellers from the Consumer Notice through settlement.  As part of my preparation for the class I reviewed the PAR Listing Contract in detail.  I have always questioned two specific statements in paragraph 13 which is titled ADDITIONAL OFFERS.  I have worked around these two statements in my own business and used the classroom as a way to see if other agents agreed with me.  Most did.  Here are the statements and my thoughts.

Line 118 basically says:  “Unless prohibited by Seller, if Broker is asked …, Broker will reveal the existence of other offers”.  While I understand and appreciate that we have to be honest, our primary duty as stated in Article 1 of our Code of Ethics is to protect and promote our client’s interest.  Generally speaking, I am not sure that telling an agent or a buyer that you have an offer on a property really helps the seller especially if the offer is not something they are likely to sign and/ or the buyer wants to avoid what may not really be any viable competition for the property.  The question demands a yes or no answer, not a maybe.  Suppose you have an unopened email or a package that you know contains an offer for a property you have listed.  You may have no idea about the details:  it could be full price or above asking or well below.  There could be contingencies that are unacceptable to your seller client.  Are you supposed to tell others that you have an offer?  Again, you cannot say “maybe”.

I offer two alternatives for rewording the sentence to be more proactive.  One would be a statement that the agent will not reveal the existence of other offers unless authorized by the seller.  Or it could state that the agent is authorized.  Either way, the statement is plain and simple.  This may be semantics but I like these phrasings better.  The other alternative would be a check box offering the seller the choice to accept or waive disclosing the existence of other offers at the time of signing the listing contract.  When the disclosure is waived the agent would respond by saying they are not authorized to answer the question.  Again, if authorized the answer is an honest yes or no.  In addition, suppose you say yes or no and the circumstance changes, perhaps an offer dies or one comes in.  Does the seller or the buyer’s agent or the buyer expect a real-time update?

At the very least, my hope would be that there is a greater likelihood that a conversation would take place than is probably happening now and that is a good thing.  Too many of my seller clients who have worked with other agents before hiring me have told me that they were negotiating an offer or heard there was interest and then nothing happened.  When I mentioned my concerns to my students I sensed that many never gave a thought to the downside of this:  some buyers run the other way when they hear about competition and line 118 does not differentiate between viable and non-viable offers.  Of course, we have many different business models and if a property is located in a market that thrives on any type of competition, disclose to your heart’s content but one size does not fit all.  We have to know our clients, their circumstances and their local market.

Within the same paragraph, line 120 states that “ONCE SELLER ENTERS INTO AN AGREEMENT OF SALE, BROKER IS NOT REQUIRED TO PRESENT OTHER OFFERS”.  My office policy has always been to present any and all offers and let the seller decide what to do.  Admittedly this may require their seeking legal advice if they like the latest offer even though under contract with another buyer with their having no apparent right to terminate the existing offer without creating a default.  Experience tells me that the grass is not always greener but it is their house!  Either way, the client is the boss and gets to make those decisions.  I advise and they decide.

My questioning this particular statement has a more basic rationale:  when a seller signs an agreement of sale, we are required by MLS rules to change the status within 3 business days.  In addition, our Code of Ethics Article 3 and RELRA require that we disclose the existence of accepted offers.  The keyword is accepted meaning that a contract has been signed.  It is the right thing to do.  Bright MLS offers two status choices:  A/C, meaning active under contract, or PENDING.

A/C technically means that the seller is still allowing showings, presumably as a way to limit the damage should the contract fall through while PENDING stops showings.  Buyers sometimes wonder why and we have to assure them that they have a viable contract although some find this unsettling and it can affect the process.

Many agents, whether it is their thinking or their client’s, use A/C and, while true or not, agents have always complained that agents who use the A/C status often do not allow showings which is a violation of our rules and makes no sense.  That is a separate matter but, given the likelihood of using A/C rather than PENDING, it makes no sense to have the seller agree that we not present any additional offers while we seem to be encouraging them.  I think we either need to change this statement or offer options depending on the MLS status chosen.  Again, let’s force another conversation.  We live in the age of scanning and email with electronic signing.  Real Estate is a people business and yet technology seems to separate us.  Sometimes I see the negative impact of that when I am asked to mediate a dispute or chair a panel hearing an ethics complaint.  The root of many problems is a failure to effectively communicate.

Of course either statement could be modified by changing the contract itself as I am doing or by using an addendum.  The question is whether either happens or is the seller put in a precarious position perhaps by an agent who does not understand the potential consequences.  Given that buying a house is typically the largest purchase someone will ever make and that the process itself is emotional enough even in the best of circumstances, I think we need to better prepare our clients for what may happen and that means making it easier for agents to explain the steps in the process and what may go wrong.  While having a sale fall through can be traumatic, it does not come close to how a buyer or seller feels when the process got in the way of itself.  The damage cannot be easily undone.

I know that no one wants longer contracts but I see these two statements as problematic.  On a related note, our state required property disclosure statement is almost the same number of pages as our state purchase agreement.  That is amazing to me!

There is no time for inexperience, empty promises or false expectations!

HIRE WISELY:  We are not all the same!

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