Realtor® Legal Tip – Who’s knows the answer to this legal mess?
October 24, 2017
Author: Curtis Bullock
Hypothetical – Suppose Joan is an agent with ABC Realty. She has a property listed at $300,000. Jim at XYZ Realty brings in an offer for his buyers (Buyer #1) at $285,000. The Seller instructs Joan to prepare a counter offer at $295,000. Joan prepares the counter offer and presents it to Jim at 7:00 pm. At 7:30 pm, another agent with LMN Realty presents Joan a new offer on the property (Buyer #2). The offer is for $305,000. The Seller wants to accept Buyer #2’s offer so she signs and communicates the acceptance at 8:00 pm. At 8:15 pm, Jim at XYZ Realty calls Joan and tells her that his buyer, Buyer #1, accepted the Seller’s counter offer at 7:45 pm. Joan informs Jim that the Seller accepted another offer from Buyer #2 at 8:00 pm and that the Seller is withdrawing the earlier counter offer.
Who wins – Buyer #1 or Buyer #2? How could Joan have avoided this situation?
A: My thought is that the seller is now contractually obligated to both Buyer #1 and Buyer #2. Since the Seller can only sell the one property, the buyer that doesn’t get it could argue the seller is in breach of contract (triggering section 16.2 of the REPC). This is not a good thing for Joan to now have to explain to her Seller. It’s clear that Buyer #2’s offer was accepted by the Seller. It is also clear that Joan did not withdraw the counter to Buyer #1. When Jim called Joan at 8:15pm he was legally incorrect in saying his Buyer #1 “accepted” the offer at 7:45pm. His buyer may have signed the counter offer at 7:45pm, but that alone is not an acceptance as many of you mentioned. However, as soon as he said his buyer accepted, Buyer #1 was under contract in that moment at 8:15pm when Jim made the call. Just because the Seller accepted Buyer #2’s offer does not automatically cancel the counter offer to Buyer #1. In order to have a valid Acceptance, Section 23 of the REPC requires the offer or counter offer be signed, and that it be communicated that is has been signed as accepted (*note – there is not a requirement that it be physically delivered, but it’s always a good idea to get the signed offer or counter offer to the other party promptly). To avoid this situation, Joan should have used the Seller Notice of Withdrawal of Counteroffer form to withdraw the counter that went to Buyer #1. At that point, the Seller could have accepted Buyer #2’s offer, or alternatively, could have dealt with the situation as a multiple offer scenario. Joan/Seller could have then solicited the highest and best offer between the two, or countered each one simultaneously using the Multiple Offer Addendum.