Caution: RELA sometimes classifies multiple offer situations as auctions

Caution: RELA sometimes classifies multiple offer situations as auctions


Once again, the current market is creating some crazy scenarios in the real estate world. As everyone knows, multiple offer situations are increasing and both sellers and REALTORS® are getting more and more creative about ways to handle multiple offer situations.

In many cases, although it may not be the original intent of the seller or listing broker, the manner in which buyers are directed to present offers might actually create an auction scenario. For example, if a seller and REALTOR® advertise that all buyers should submit sealed bids on a property, further stating that the property will go to the highest bidder, it is quite likely, an auction.

Anneliese FierstosAnneliese Fierstos
Illinois REALTORS® Legal Hotline Attorney

In Illinois, licensed real estate brokers may auction real property without additional licensing. However, because it is a licensed activity under the Real Estate License Act (RELA), the listing broker who becomes involved in auctioning must comply with all duties outlined by RELA. For example, licensees must meet all of the duties to their sellers as outlined in RELA Section 15-15, which includes:

  • Performing the terms of the brokerage agreement;
  • Putting the interests of the client first; and
  • Keeping confidential information of the client confidential.

Rule Section 1450.715(g) specifically states auction advertising must contain, when applicable, the names and addresses of:

  1. The licensed broker or managing broker;
  2. The licensed auctioneer;
  3. The licensed auctioneer or any individual holding a real estate auction certification; OR
  4. The licensed broker or managing broker and any individual holding a real estate license certification, who is not exempt under 5-20(13) of the Act.

Any brokerages advertising real estate auctions must comply with RELA Section 10-30(a) which prohibits deceptive and misleading advertising. In addition, all advertising for auctions must contain all necessary information to the public in an accurate, direct, and readily comprehensible manner. Auction advertisements must make it clear to the public the type of auctions, terms of the auctions, the amount set for minimum bids, and any time frames set for acceptance. For example, under the sealed bid scenario, the buyers/bidders should be aware of all terms and conditions for acceptance and whether the seller is reserving the right to reject all bids submitted. If all bids are rejected, it will be important to inform bidders what the next steps will be and then contact the highest bidders to engage in traditional multiple offer negotiations.

Auction advertising should describe the type of auction as well as all terms. Not all auctions involve “quick-talking” auctioneers standing at podiums, selling by public outcry. Auction can be:

  • Minimum Bid – In this style of auction, a threshold price is established and if no one bids at that price the sale does not take place.
  • Reserve Bid – In this scenario, the highest bid functions as a purchase offer, and the seller has the option of rejecting all bids (usually the seller must decide whether to accept or reject bids within a certain time frame, like 72 hours).
  • Absolute Auction – In this case, a property will sell if someone makes an offer. (However, the seller takes a risk that he or she may receive much less than what the property is worth).
  • Sealed Bid Auction – All bidders simultaneously submit sealed offers to the auctioneer and do not know how much the other participants have tendered. The bids are opened on the advertised date, and the highest bidder is usually declared the winner.

Licensees who become involved in auctioning should also become familiar with any local MLS Rules which may require auctions be listed in a separate section of the MLS compilation of listings.

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