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:

Correct Documentation for Multiple Buyers in Bidding Wars

May 1, 2015 - Updated: May 2, 2015

 

Correct Documentation for Multiple Buyers in Bidding Wars

 

With bidding wars increasingly more common and even spreading out of the GTA, it will be important to ensure that going forward you have the correct documentation.

 

Bob lists his property with XYZ Real Estate. Offers are held back until next Tuesday at 8:00 pm.

 

There are over 100 showings of the property.

 

Numerous agents work for ABC Realty and have taken their clients through.

 

Martha, Mary and Mildred have all been shown the property by ABC Realty, through their respective agents David, Betty and Zack. I should say that ABC Realty is one of the largest in the area, and it has 10 offices. David and Betty know one another since they work out of the same office. They have never met Zack.

 

Nine people decide to submit Offers, including Martha, Mary and Mildred.

 

David calls Betty to find out what she thinks the property might be worth. Betty realizes that she has instructions to prepare an Offer, advises David and they do not discuss the matter any further.

 

So, what documents should be signed?

 

Well, that could be somewhat problematic. It’s not entirely clear.

 

Let’s have a look at the law:

 

Multiple representation

 

22. A registrant shall not represent more than one client in respect of the same trade in real estate unless all of the clients represented by the registrant in respect of that trade consent in writing.

 

This appears in Ontario Regulation 567/05, passed pursuant to the Real Estate and Business Brokers Act, 2002.

 

There is a document called “Confirmation of Co-operation and Representation. It was drafted by OREA and is one of the standard Forms.

 

It was designed to make sure that the parties to a transaction knew which Brokerage was representing the Seller, the Buyer and who was paying commission and how much that commission would be.

 

It also dealt with situations whereby the one Brokerage acted for both the Seller and the Buyer.

 

In the section dealing with the Co-operating Brokerage it contains the following statement:

 

“Additional comments and/or disclosures by Co-operating Brokerage: (e.g., The Co-operating Brokerage represents more than one Buyer offering on this property.)

...................................................................................................................................”

 

However, that was something of an afterthought. The Seller couldn’t care less. The three buyers with the same Brokerage need to know about one another.

 

So, Martha, Mary and Mildred are the ones who need to know about each other. They need to know that ABC Brokerage is acting for all of them, or two of them, one of them or none of them.

 

The 2015 OREA Confirmation Form is NOT the correct document for this, nor is it the correct forum, that is, one involving the parties to the Agreement of Purchase and Sale. On this point, the Seller doesn’t really care, one way or the other.

 

One of the difficulties is that there is no requirement that the Buyer Brokerage (ABC Realty) be notified of Offers to be submitted by its own agents internally. Then, ABC would know as soon as there was a second buyer. As you know, there was no such requirement whatsoever until the new bidding war retention of Offers problem arose. That problem will be resolved somewhat effective 1 July 2015.No one obviously wanted to go this far. So, the consequence is that the Buyer Brokerage is relying upon Listing Brokerage to give it a “heads up”.

 

The moment XYZ Brokerage knows that it is about to receive an Offer from a second buyer from ABC, it should let ABC know. And further when the third Offer from ABC is registered, it should let ABC know about that too.

 

The legal requirement is CONSENT, not disclosure. All three buyers, Martha, Mary and Mildred are to consent to multiple representation. This is a matter between them and their one single agent, the ABC Brokerage. This consent is to be in writing.

 

In our example, all three might be quite content since they would each be able to say that individually they have their own agent and spokesperson.” For the buyers. It acts through its own representatives.

 

But, let’s complicate matters. Betty is heading out of the country on vacation and she assigned all her files to David. This is a surprise to David since he has his own client Martha, and now he is also presenting an Offer for Mary too.

 

Martha may accept this since she has been working with David for over a year. Mary however may think that she should have someone else, other than David, from the Brokerage acting for her and presenting her Offer to the Seller.

 

There are several issues here. If the Listing Brokerage becomes aware that another Brokerage is in multiple representation, then it has a statutory responsibility to advise them. The Agreement of Purchase and Sale between the parties is single agency representation. Obviously, that’s not where to place this. The Confirmation Form calls for the disclosure, however, the Form itself is rather ill-considered.

 

Registrants are to use current forms. Generally, one would look to OREA for such a Form, however, they are not perfect and this document is a big mess. Pull out another, or three more, pieces of paper for all three buyers to sign authorizing multiple representation. That is the document that needs to be signed, not the 2015 Confirmation Form.

 

Since the Confirmation of Co-operation and Representation is not the correct Form, we will have to draft something else up.

 

Have a look at this document and see if it fits the bill:

 

Multiple Buyer Disclosure and CONSENT

 

 

BROKERAGE:........................................................................................................

BUYER:....................................................................................................................

 

For the transaction on the property known as:................................................................................................................................

Prospective Seller:....................................................................................................................

 

MULTIPLE REPRESENTATION Disclosure:

 

The Co-operating Brokerage has entered into a Buyer Representation Agreement with more than one Buyer and represents the interests of all such Buyers, with their respective consents, for the purchase of this property from the prospective Seller.

 

The prospective Seller is not party to, nor privy to the contents of this agreement.

 

This document shall be executed in counterpart(s), with each such Buyer authorizing the Co-operating Brokerage to act as agent, but without disclosure of their identities to one another.

 

In this proposed transaction, there are _______ registered Offers as of ___________

                                                             Number                                       Time and Date

 

 

The Sales Representative/Broker assigned to you, represents _________ other Buyer(s) under a Buyer Representation Agreement.

 

It is anticipated that there may be additional registered Offers in respect to this property prior to the required time of submission.

 

It is also possible that another Buyer may be represented by the Brokerage and unknown to the Brokerage be contemplating the submission of an Offer or already have provided instructions to a representative of the Brokerage for the preparation of an Offer.

 

The Co-operating Brokerage must be impartial and strive to equally protect the interests of all such Buyers in this transaction.

 

The Co-operating Brokerage has a duty of full disclosure to all such Buyers, including a requirement to disclose all factual information about the property known to the Co-operating Brokerage.

 

However, the Co-operating Brokerage shall not disclose:

 

• The identity or any personal information about a Buyer, to any other Buyer(s), unless otherwise instructed in writing by such Buyer;

• The price and terms that the Buyer may or will include in any Offer, to any other Buyer(s), unless otherwise instructed in writing by such Buyer;

• The motivation of the Buyer, to any other Buyer(s), unless otherwise instructed in writing by such Buyer

 

It is understood that the Co-operating Brokerage shall endeavour to perform and carry out the terms of any Buyer Representation Agreement executed and in force between it and a Buyer; PROVIDED THAT the terms of such shall be deemed to be amended so as to enable the Co-operating Brokerage to act for and to represent all such Buyers.

 

 

SIGNED BY THE BROKER/SALESPERSON REPRESENTATIVE(S) OF THE BROKERAGE

...............................................................................................................

(Name of Co-operating/Buyer Brokerage)

 

Tel:. .........................................

 

Date:........................................

 

..............................................

(Authorized to bind the Co-operating/Buyer Brokerage)

................................................................................................................

...............................................................................................................

(Print Name of Broker(s)/Salesperson Representative(s) of the Brokerage)

 

CONSENT FOR MULTIPLE REPRESENTATION

 

The Buyer hereby consents to the Co-operating Brokerage representing more than one client in respect to the proposed acquisition of this property and acknowledges that the all such Buyers are competing with one another.

 

The Buyer hereby authorizes and instructs the Brokerage to proceed with the submission of an Offer on this property.

 

I have received, read, and understand the above information, and I acknowledge receipt of a copy of this agreement.

 

This document is to be signed by the Buyer(s) participating in the submission of a single Offer. Other Buyer(s) will be requested to execute similar Consents.

 

Buyer Name:................................................................. Date:......................................

.............................................................

(Signature of Buyer)

 

Buyer Name:................................................................. Date:......................................

.............................................................

(Signature of Buyer)

 

 

Brian Madigan LL.B. Broker

www.iSourceRealEstate.com

 

 


Tagged with: bidding wars multiple representation dual agency two buyers conflict forms ontario
| | 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)