Update on Best Practices for Multiple Offers on Short Sales

In June 2008, I wrote this blog post: Multiple Offers on Short Sales - Best Practices.

This is an update to that post as the GLVAR addendum to the purchase agreement regarding short sales has been revised as of 06-09. Also, I wanted to re-iterate and expand on my opinion of best practices on handling multiple and subsequent offers.  Note:  this post discusses procedures and forms applicable to Nevada real estate licensees.

In my opinion, the best practice in a multiple offer short sale (or any offer actually) is to ...

• Review all the offers with the seller
• Possible options for handling multiple offers:

• the seller accepts or counters one offer, rejects other offers in writing with option of remaining in a back-up position
• use a multiple offer notification form to inform all cooperating agents and their prospective buyers that they are in a competing offer situation.  The form should have a time frame to submit highest and best offer
• counter all of the offers using a proper multiple offer form which puts all parties on notice of the multiple offers and contains contract language that states the offer is not valid until re-signed by the seller  (this option also allows all prospective buyers to present their final and best offer or withdraw their offer)

• Use the GLVAR Short Sale Addendum to Purchase Agreement which contains key clauses and disclosures about the short sale process. Download ShortSaleAddendumtoPurchaseAgreement
• Submit the fully executed best offer to the lender for approval
• Keep all parties informed of status as appropriate; notify respective agents if any offers have been rejected by seller
• In the event another offer is subsequently received, the Short Sale Addendum contains language which states:
  
  
   6.Other Offers; Right of First Refusal.
   Buyer and Seller acknowledge that the Seller's Agent is required by the Multiple Listing Service to place the property in "Contingent" status after the Purchase Agreement is executed, while the transaction is subject to Lender Approval. The Parties understand that additional offers may be received by the Seller's Agent, which must be presented to the Seller pursuant to Nevada law. If Seller receives a bona fide written offer from a third party for the purchase of the Property, which offer Seller is willing to accept, Seller will give Buyer written notice thereof, including the material financial terms and conditions. Buyer shall have the right for 3 business days after receipt of such notice to meet the price and terms as contained in the third party's offer. To exercise this right, Buyer shall provide a written addendum including the new price and terms, as well as a pre-approval letter for the new Purchase Price. If Buyer fails to exercise this right within the time specified, Seller reserves the right to terminate this Agreement and to accept the third party's offer and forward it to Lender for review.

When Taking the Listing

• Explain to the client that competing offers may be received.
• Discuss with the client options for handling multiple offers.
• The client decides how they want to handle multiple offers.
• Advise the client that they may wish to seek legal counsel if they do receive multiple offers.

Multiple Offer Resources:

• Nevada Real Estate Division Info Bulletin on Multiple Offers:
  Download Ib01-MultipleOffers_NV_RE_Div
  
• Multiple Offer Negotiations - Sue Saunders, General Counsel, NVAR:
  Download MultipleOfferNegotiation_SueSaunders_NVAR
• Multiple Offers by Buffy Jo Dreiling, NVAR Legal Counsel:
  Download MultipleOffersBuffy Jo DreilingNVAR