As the summer selling season heats up, more questions relating to multiple buyers and the use of the bump clause have been the topic of conversation on the WRA Legal Hotline.

Multiple offers

A seller has received three offers on his listing and is expecting a fourth as well. How can the brokers advise the consumers of the use of the multiple counter-proposal?

Step one: working with the seller

In situations where there are multiple buyers, the seller may be referred to the WB-46 Multiple Counter-Proposal, which would allow the seller to negotiate simultaneously with both buyers. The WB-46 “proposal” is used to allow the seller to negotiate with more than one buyer and avoid risking multiple accepted primary offers. 

The broker may discuss with the seller the potential pros and cons of using a WB-46. In some cases, buyers do not want to participate in what may be lengthy negotiations or a bidding war for the seller’s property. After consideration, the seller may elect to use the WB-46 Multiple Counter-Proposal to negotiate with more than one buyer; or in the alternative, the seller may elect to accept one of the offers as presented or negotiate with one buyer and reject the other offers.

Step two: working with the buyers 

If the seller decides to initiate multiple counter proposals, each buyer is given time to consider the seller’s proposal. The buyer may accept it, reject it and walk away from the transaction, or reject it and draft a new offer or counteroffer including terms and conditions acceptable to the buyer. A broker working with a buyer should let the buyer know there is nothing requiring the seller to wait for any or all of the buyers to respond to the multiple counter proposals. The buyer should respond in a timely manner or risk losing the opportunity to purchase the property. In addition, the seller may use different proposals for different buyers. For example, one WB-46 issued by the seller may increase the price while another changes the closing date. If the buyer accepts the seller’s multiple counter proposal, it becomes an offer from buyer to seller that can be confirmed (accepted) by the seller to create a binding sales contract.

Step three: working with the seller 

The seller may receive more than one accepted multiple counter proposal back, at which time the seller would consider which was more attractive. It is also possible for the seller to accept an offer from another buyer. The best offer could be accepted and the others would either be allowed to die or could be countered back as secondary. The seller is not required to respond to all offers, but should be careful that the decision of no response is based on legitimate reasons; the seller does not want to risk any accusations of fair housing law violations. For example, if the concern is price, all offers could be addressed on a multiple counter-proposal that asks for a higher price, and buyers out of that range would drop out. Ultimately, it is the seller’s decision whether to sell their property, to whom and at what terms.

Escalation clauses

The buyer is very interested in the property and knows the seller has been presented with two offers. Can a buyer say they will pay more than another offer? 

Yes, it is a legitimate negotiation strategy to negotiate price at an amount above another’s offered price. The offer to purchase must state the price the buyer is willing to pay to purchase the property. The price may be determined by referencing the price of another offer to purchase. If the buyer wants to use such a strategy, the equation used to determine price must be clear and unambiguous. 

Drafting issues to consider include: using only another bona fide offer to determine price, a maximum price that would be offered, requesting the seller to provide copies of other offers directly to the buyer, and the time allowed for other offers. The buyer may also be reminded that price may not be the seller’s most important condition for the sale of property.

Primary and secondary offers

To bump or not to bump 

The seller has an accepted primary offer with a 72-hour bump, and a secondary offer has been accepted. What are the seller’s options? Does it matter if the secondary offer is also contingent on the sale of the home or financing? Does the seller have to bump the primary buyer? 

According to the standard WB-11 offer, so long as the accepted secondary offer is a bona fide offer, the seller may trigger the bump clause with the first buyer, or the seller may wait. The second offer may include any terms or conditions at a higher or lower purchase price, with different closing dates or contingencies. The terms of the secondary offer, including the lock-in period, will influence whether the seller initiates the bump immediately, waits, or elects not to bump the primary buyer. Note, however, that in some offers or addenda, secondary buyers will modify the standard language and require the seller to initiate the bump with the primary buyer. 

Renegotiate with primary buyer

A seller has an accepted primary offer and also accepted a secondary offer. The seller also is considering serving the bump notice to the primary buyer. The secondary offer is a better offer, and the seller feels that the primary buyer may try to remove the home sale and meet the financing contingency as required by the primary offer. Can the seller have the primary buyer meet the terms of the secondary offer and not give the bump?

A seller may try to renegotiate the terms of an offer with a primary buyer. However, the primary buyer is not required to agree to the seller’s proposal. If the seller initiates the bump and the primary buyer wishes to remain in primary position, the seller only needs to meet the terms of the closing of the buyer’s property contingency as it exists in the accepted offer. If the primary buyer agrees to the seller’s proposed terms, the parties should amend the offer. In such a case, the buyer may ask for language in the amendment that the bump clause is removed from the contract so that the seller cannot attempt to bump them again in the future. 

The broker is working with a buyer who knows there is a primary offer on the property. What negotiation strategies can the buyer use to get into primary position? 

The negotiation to modify the secondary offer language of the offer can fall into the following broad categories: (1) require the seller to, within a certain time, issue the bump notice to the primary buyer; (2) require the seller to elevate this secondary offer into primary position in case the primary offer fails; or (3) limit the seller’s ability to renegotiate with the primary buyer. Each of these tactics is subject to negotiation. 

Actual receipt 

There is confusion about when the timing starts when a bump notice is given — does the timing begin when the notice is delivered, or when the agent working with the buyer receives the notice, or when the buyer receives it? 

The offer states that the time runs from when the buyers, not their agent or recipient for delivery, have actual receipt. Actual receipt is defined in the offer as, “ACTUAL RECEIPT: ‘Actual Receipt’ means that a Party, not the Party’s recipient for delivery, if any, has the document or written notice physically in the Party’s possession, regardless of the method of delivery.” The definition clarifies that actual receipt has not occurred when the agent gets a notice, only when the buyer does. Therefore delivery to the agent will not start the clock — only actual receipt by the buyer will.

Proving actual receipt can be challenging when accomplished by any method other than personal delivery. There are techniques that may be used to attempt to prove when a party actually receives the notice, for example, certified or registered mail, or “receipt requested” e-mails are possible.

Tracy Rucka is Director of Professional Standards and Practices for the WRA.