The Bidding War and the Buyer Without Representation
A three-bedroom home in Bedford is listed at $549,000 with offers to be presented at 6 p.m. on a Tuesday. The listing agent, Rob, receives five offers. One is from an unrepresented buyer, Nadia, who calls Rob directly and asks what she should offer. Rob tells her the sellers want to sell quickly and that "the other offers are around $570,000." Nadia submits $575,000 with no conditions. Another offer is $572,000 with a financing condition from a buyer represented by another brokerage. The sellers accept Nadia's offer. Afterward, Nadia learns that Rob's statement about the other offers was exaggerated and that the sellers would have accepted $560,000. She also learns she had no representation and no one explained the risks of a no-condition offer.
1. Evaluate Rob's conduct toward Nadia and the other buyers during the offer process.
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Rob's conduct raises several problems. First, Nadia was unrepresented. Rob should have explained clearly, in writing where possible, that he acts for the sellers, that he cannot give her advice or advocate for her, and that she should consider obtaining her own representation. He should not have advised her on what to offer.
Second, telling Nadia that other offers were "around $570,000" when that was not accurate is a misrepresentation of the offer process. Even if the figure was loosely based on one offer, presenting it as a range of competing offers to induce a higher bid is misleading and undermines the integrity of the process. Licensees must be honest and must not use deceptive tactics to inflate offers.
Third, Rob should not have encouraged a no-condition offer without ensuring Nadia understood the risks: no financing protection, no inspection, and exposure if she cannot close. If she chose to proceed unconditionally, that was her decision, but she needed to understand the consequences.
Finally, Rob owed fairness to all buyers. Disclosing or mischaracterizing other buyers' offers to one party can prejudice the sellers if it later unravels the deal, and it breaches the duty of good faith and fair dealing owed through the transaction.
2. What should Rob's brokerage do now, and how should multiple offer situations be handled to avoid this outcome?
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The brokerage should first preserve all records: the offer log, times of receipt, communications with Nadia, and notes of any calls. The managing broker should interview Rob and any assistants. Because Nadia may have relied on a misleading statement, the brokerage should assess whether to offer a resolution and should notify its errors and omissions insurer. The brokerage should also consider whether the sellers were harmed; a deal that collapses because a buyer feels misled can expose them to a failed transaction.
Going forward, the office should adopt a written multiple offer protocol. When offers are being presented: record every offer and the time received; do not disclose the contents or amounts of competing offers unless the seller instructs disclosure in writing and it is done accurately to all parties; never invent or inflate competing offers; and explain to unrepresented buyers, in writing, that the brokerage acts for the sellers and that they may seek independent representation.
Rob should also have a scripted disclosure for unrepresented buyers and should document that he provided it. Any advice about price or conditions should be left to the buyer's own adviser. The brokerage should train staff on the difference between marketing the property and negotiating on the seller's behalf, and should require written seller instructions before any information about competing offers is shared.