Brian Madigan LL.B., Broker
BRMadigan@iSourceRealEstate.com

RE/MAX West Realty Inc.,
Brokerage
Independently owned and operated

96 Rexdale Blvd. 
Toronto, Ontario 


Phone: 416-745-2300
Toll Free: 1-888-507-0817

 

Search Blog

Search in:  
    
    
       

Sort by:

Brian Madigan’s Annotated Version of RECO’s Bulletin on Written Directions for Multiple Offers

March 2, 2017 - Updated: March 2, 2017

Brian Madigan’s Annotated Version of RECO’s Bulletin on Written Directions for Multiple Offers

 

The RECO Bulletin appears below with my commentary highlighted in yellow.

 

Written direction for multiple offers

February 21, 2017

Bulletin #2017-1

 

Overview

 

The purpose of this Registrar’s Bulletin is to explain and clarify the requirement of you, as registrants, to convey an offer to your clients and customers as soon as is reasonably possible, unless you receive very clear written direction to do otherwise.

 

This means you absolutely must have something in writing from your Seller if you decide to set an Offer date.

 

This bulletin focuses on the conduct of seller representatives in multiple offer and delayed offer circumstances. However, it’s important to remember that the requirement to convey offers applies to buyer representatives as well.

 

This Bulletin deals with the responsibilities of both Sellers’ and Buyers’ agents in:

 

1)    Multiple Offers situations, and

2)    Set Offer date situations.

 

Before you can receive any written direction from your client, you must explain:

 

  • the pros and cons of delaying the offer presentation to a specific time and date; and,

 

The advantages and disadvantages of the delayed Offer date must be explained in advance. That means that you should probably have something set out in writing first. Let the Client read that, ask you any questions that they might have and then proceed to sign the written direction.

 

  • the options for handling any pre-emptive offers (commonly referred to as bully offers) that you receive.

 

What would happen if there were a bully offer or pre-emptive offer? Would you look at it? Would you defer it to the Offer date? This requirement placed upon the registrant is to deal with this issue ahead of time, not when it happens, ahead of time, so that the Seller is making a decision without any additional pressure.

 

Clients may change their instructions, and we will explain what to do later in this bulletin.

 

Obviously here, you need to be in a position to “track the changes”. And, what’s more, later on, you need to be able to prove the exact time of any changes.

 

The framework set out in this bulletin is intended to promote a transparent and fair offer process. It is essential that all registrants deliver a fair and transparent process.

 

This is new! This is different. Previously, emphasis had been placed upon the role and responsibility of the Listing agent to the Seller and that was it. Kudos to RECO for taking this matter one step further and imposing some rules of “fairness and honesty” into the process. You will see later that RECO makes reference to s.3 of the Code of Ethics dealing with honesty and fairness to ALL. Yes, that includes the Seller, but it also includes everybody else.

 

Obligation to convey offers

 

The law is clear: as a registrant, you must convey an offer to your client as soon as possible. An exception arises if your client has given clear, detailed, and express written direction to do otherwise. A client may want to delay their consideration of offers to a specific time and date, typically as part of a marketing strategy to set the stage for multiple offers.

 

Clear, detailed and express! That will eliminate confusion going forward. If this takes place then there should be no problem for the agent proving the decision, the change in the decision and then the second change in the decision, and so on. Keep track and keep careful notes.

 

You must act in strict accordance with the instructions you 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.

 

Of significant importance is the matter of “informed consent”. We are not simply talking about a client who has signed a piece of paper and all you can prove is that the client actually signed it. Did they understand it? If asked, could they explain it to you or to anyone else? If they can’t, then, you haven’t quite explained it sufficiently. So, keep trying. When the client finally understands, that’s when you pull out the pen.

 

Step 1: Explain the pros and cons of delaying offers
 

When you are discussing marketing strategies with your clients, have a clear and thorough talk about the pros and cons of delaying offers, and the implications of the different options. For example, at a high level, the following would likely apply to delaying offers in general.

 

Here’s something of a “heads up” from RECO, so these points MUST be part of your explanation. Obviously, you will wish to add some additional points, and you should have something in writing that your client can review while they are not “under pressure”. You will also ask: “Do you have any other questions?” You will ALWAYS, ALWAYS ask this question at the end. That will be your FINAL question, and you will make note of it. Ten years from now, you will be certain that you asked this question because:

 

1)    it’s in your notes,

2)    it’s your standard practice, and

3)    you ALWAYS do it.

 

  • Pros: This strategy may generate increased interest in their property, and potentially multiple offers, and the best price.
  • Cons: Your client runs the risk of losing out on an attractive offer from a buyer who is not inclined to wait for a specified time. Your client should also be aware that if the offer date passes with no offers submitted, prospective buyers may see the property as less desirable or overpriced.

 

The pros and cons mentioned here are a must. In addition, you should add other pertinent information.

 

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

 

Next, explain to your client that in an active market, a delayed offer approach may prompt some buyers to submit pre-emptive offers. These often expire before the delayed offer presentation in an effort to avoid, or “pre-empt” the established offer process. The written directions you receive must explicitly outline how you are to handle pre-emptive offers.

 

The bully Offer is naturally a risk with any delayed Offer date. How do you propose to handle them? The time for discussion and setting a strategy is NOW, not later when you actually have one.

 

Step 3: Find out how your client wants to handle pre-emptive offers

 

Here are some sample questions you can ask your client to help them to determine how they would like to handle pre-emptive offers:

 

If a pre-emptive offer came in and you were not told about it, how would you feel?

 

How much information do you want about any pre-emptive offers that come in? Do you want to:

 

  • be notified of a pre-emptive offer, without seeing the details?
  • see the details, but not formally consider the offer until your offer presentation date?
  • consider all offers received before the offer presentation date? 
  • only consider offers that are above a certain price or contain a certain condition (for example, no inspection)?
  • not be informed about any pre-emptive offers at all?

 

While this list is not exhaustive and possible options should be explored based on your client’s interests and level of knowledge, these are the points of discussion you should be hitting so they can make an informed decision. It is only after such a discussion that they can give you clear direction on how to manage any scenario that may arise.

 

These are important points to consider. Naturally there may be others that would affect your client in their own situation.

 

If your client’s instructions are still not clear after a discussion about these questions, continue the conversation until both you and your client understand and agree to exactly what their instructions are.

 

Please refer to my commentary above regarding the method to handle this. Document the discussion, ask: “Do you have any other questions?” And, ONLY when they say “NO”, do you proceed to have them place their signature upon the written direction.

 

Step 4: Document your client’s instructions

 

Once you have explained all options to your client, and ensured that they understand them, document, in written detail, their instructions.

 

This is the FINAL authorization to proceed.

 

Changes to the direction

 

Your client can change their direction at any time. However, a new written direction is required to do so. For example, if your client, who previously said they did not want to see pre-emptive offers, suddenly decides they now want to receive offers, a new written direction needs to be made to override the previous direction.

 

It is important to break this statement into two parts:

 

1)    disciplinary matters,and

2)    civil liability.

 

You will see that RECO wants a WRITTEN direction to overrule a previous written direction. That makes a lot of sense. Presumably, you would not be responsible if there were a disciplinary investigation. You wouldn’t be expected to ACT on the new instructions until you had it in writing.

 

The next issue is civil liability. You have to ACT IMMEDIATELY! A verbal change is sufficient. You are required to accept a verbal change to your instructions without delay. That would be acting in accordance with your fiduciary responsibilities.

 

So, with “time pressures” what do you do?

 

As soon as the client changes their mind on the topic, you will confirm it in writing. You can send a letter, a fax, an e-mail or a text. To be proper, your trade name, registration status and Brokerage must appear. This is usually the case with letters, faxes and e-mails, but often overlooked on texts. This form of signature can easily be added automatically to text messages: “John Smith, Sales Representative, ABC Brokerage”.

 

Accordingly, you should deal with this immediately and reduce the override instructions to writing. Confirm the client’s new instructions at once.

 

If this happens, you must immediately take the following steps:

 

  • First, you must change the notes to any listing for the property, to accurately reflect the new offer process.

 

After you have the override instructions, change the listing. That doesn’t mean a reply to your email or text; that means once you have pressed “send” from your end and that electronic (but written) communication has been sent.

 

  • Second, you are expected to notify, in writing, anyone who has expressed an interest in the property of the change to the offer process. An expression of interest includes parties that have booked viewing appointments, have viewed the property, have informed the brokerage or the listing representative that they will be submitting an offer on the property, or have submitted an offer or an offer summary sheet on the property. In addition to traditional forms of written notice, text message and email are also acceptable.

 

This is extremely important to note. This is a change in the rules. RECO has introduced the element of “fair play” into the process. Previously, these types of notices were to be sent out because it was in the Seller’s best interest. The more bidders, the better. That was based on the fiduciary duty at common law and s.4 of the Code of Ethics. This is a little different! RECO has now introduced s.3 of the Code of Ethics into the picture. This is the provision of “honesty and fairness” to ALL. That includes buyers, and those who are just interested.

 

Who do you tell?

 

You required to notify:

 

1)    parties that have booked viewing appointments,

 

2)    have viewed the property,

 

3)    have informed the brokerage or the listing representative that they will be submitting an offer on the property, or

 

4)    have submitted an offer or an offer summary sheet on the property.

 

Kindly note that this list was not exhaustive. There could be others as well. The sentence started out “An expression of interest includes parties that…”. Those four categories were just examples.

 

It should be noted that this would be everyone. These are members of the public and are not necessarily represented by a registrant.

 

Why is this notification expected? The aim of delaying offers is to generate interest in the property. In keeping with this reasoning, it is in your client’s best interest to inform those who may have shown interest in the property of any change in the offer presentation date or process so they may deliver their offer on time.

 

This reference is essentially to s.4 of the Code of Ethics, but as you will observe, it’s not the complete explanation, if we are now talking about “fair rules”.

 

RECO looks for written directions when investigating complaints

 

Unless you have clear, detailed, unequivocal written directions that clearly state that your client does not want to know about any pre-emptive offers, you must inform them when you receive pre-emptive offers. The law is clear that the default is that you convey the offer, unless you have clear direction not to.

 

This is the default position. This is the case both under the Act and at common law.

 

When RECO receives complaints about an alleged unfair or biased offer process, we look for a client’s written directions and request copies of all offers (or summary documents) received for the property to determine if the offer process was conducted fairly and transparently.

 

The perspective of the RECO investigation will be fairness. Transparency and openness is a key to the process. Previously, these issues arose by reason of a Seller’s complaint. With Bill 55, effective 1 July 2015, the concept of fairness to the public was introduced but limited. This Bulletin makes that matter clear.

 

The bottom line

 

Foresight, open communication, and planning go a long way. Establishing clear directives with your client early on in the process ensures you are on the same page, you are able to protect their interests, and you can act on their behalf with fairness, transparency, competence, and good judgment.

 

The entire process should be well-documented, from beginning to end.

 

Relevant sections

Code of Ethics: Section 324

Registrar’s Bulletin – Written direction for multiple offers

 

COMMENT

 

That was the annotated version of the RECO Bulletin with my commentary. For ease of reference, here are the sections of the Code of Ethics mentioned by RECO and mentioned by myself:

 

Fairness, honesty, etc.

3. A registrant shall treat every person the registrant deals with in the course of a trade in real estate fairly, honestly and with integrity.

 

Best interests

4. A registrant shall promote and protect the best interests of the registrant’s clients.

 

Conveying offers

24. (1) A registrant shall convey any written offer received by the registrant to the registrant’s client at the earliest practicable opportunity.

(2) A broker or salesperson shall establish a method of ensuring that,

(a) written offers are received by someone on behalf of the broker or salesperson, if the broker or salesperson is not available at the time an offer is submitted; and

(b) written offers are conveyed to the client of the broker or salesperson at the earliest practicable opportunity, even if the broker or salesperson is not available at the time an offer is submitted.

(3) Without limiting the generality of subsections (1) and (2), those subsections apply regardless of the identity of the person making the offer, the contents of the offer or the nature of any arrangements for commission or other remuneration.

(4) Subsections (1) to (3) are subject to any written directions given by a client.

(5) Subsections (1) to (4) also apply, with necessary modifications, to,

(a) written amendments to written offers and any other written document directly related to a written offer; and

(b) written assignments of agreements that relate to interests in real estate, written waivers of conditions in agreements that relate to interests in real estate, and any other written document directly related to a written agreement that relates to an interest in real estate.

(6) Subsections (1) to (5) apply, with necessary modifications, if a brokerage and a customer have an agreement that provides for the brokerage to receive written offers.

(7) Subsections (1) to (5) apply, with necessary modifications, to brokers and salespersons employed by a brokerage, if the brokerage and a customer have an agreement that provides for the brokerage to receive written offers.

 

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com


Tagged with: reco bulletin written directions. multiple offers ontario law
| | Share

Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

Powered by Lone Wolf Real Estate Technologies (CMS6)