“Did the Seller Receive My Buyer’s Offer?” by Scott Peterson, CAR’s Legal Counsel
I love talking about “Hot Market Problems.” Market velocity generally means good business for REALTORS® and good job security for the industries and individuals who support REALTORS® (including us annoying real estate lawyers)! Hot markets can be exhausting for all participants, but it is certainly better than the alternative. High velocity also presents unique frustrations and challenges for buyers and the REALTORS® who represent them.
An increasingly common Legal Hotline question I receive in the current “hot market” involves the following scenario: A buyer’s REALTOR® prepared and delivered an offer, on behalf of their buyer, to a seller. Unfortunately (for the buyer), the offer was only one of multiple offers that the seller received, and the buyer’s offer was not accepted. Moreover, the buyer’s offer was either allowed to expire without a response, or it was simply responded to with a short email from the listing REALTOR® saying “the Seller decided to accept an alternative offer…”
The Legal Hotline call that follows is usually from a (sometimes) frustrated buyer’s REALTOR® on behalf of their (always) frustrated buyer asking: “How do we even know they presented our offer… AND what can we do about it?”
My initial response is that, absent clear evidence to the contrary, I believe it is unlikely that a seller’s REALTOR® would ever unilaterally decline to present an offer to their own client. The risks are simply too high. That said, the buyer’s question and frustration are understandable, so I generally point out the following considerations:
Any REALTOR® representing a seller would be putting themselves in considerable risk of Real Estate Commission discipline if they did not present an offer to a seller client. License law, though specifically enumerated “uniform duties,” explicitly require a licensee to present all offers that have been made by a buyer to the seller (even if the property is currently under contract). If it were determined through complaint and investigation that a licensee was not presenting offers, they could be subject to very strict discipline by the Real Estate Commission.
BREACH OF CONTRACT
In addition to the regulatory discipline, a listing REALTOR® who didn’t present offers to their client could be in breach of their listing contract with the seller. In addition to mandating the “Uniform Duties,” as part of the agreement, a seller’s “agent” could also be in breach of their fiduciary (or “Additional”) duties as outlined in the Exclusive Right to Sell contract. If the REALTOR® declined to present an offer to their seller for their own personal interest (“double-ending the deal” maybe?), they would be breaching their fiduciary from a couple of different perspectives. This breach of contract could easily lead to civil liability for a broker in the event their client was damaged by the REALTORS® failure to present an offer.
CODE OF ETHICS
Another potential liability for a REALTOR® who decides not to present an offer to their seller is Code of Ethics discipline. From my perspective, there are three or four different Articles of the Code of Ethics that could be invoked (depending on the specific circumstances) in the event a REALTOR® unilaterally determined to withhold an offer from their seller.
Regardless of the reasoning, listing REALTORS® who decide to withhold offers intended for their sellers do so at the potential of significant (regulatory, civil and Code of Ethics) peril. Despite this fact, it is often alleged (and occasionally happens). When talking to a buyer’s REALTOR® on the Legal Hotline regarding solutions, I point out the following:
CONTRACT TO BUY & SELL
As most people are aware, the end of the Contract to Buy & Sell contains checkboxes for “Countered” and “Rejected.” For a variety of reasons, those boxes will be removed from the Commission approved Contract beginning January 2019. One of the reasons these boxes are being removed is that buyers often expect sellers to check the box “Rejected” even though a seller has no obligation whatsoever to do so. This can put an innocent listing REALTOR® in the position of repeatedly pestering their seller to do something that the seller isn’t obligated to do… check the “Rejected” box.
CONTACT THE SELLER
One of the most concerning requests that buyers make of their REALTORS® to resolve their concern is asking their agent to contact the sellers directly to question whether the sellers received the offer. This request is problematic for a variety of reasons and should be flatly rejected by the buyer’s REALTOR®. In addition to potential Code of Ethics implications, a buyer’s REALTOR® contacting a seller directly could create very serious Real Estate Commission rule violations. While there aren’t explicit rules that would prevent a prospective unlicensed buyer from contacting a seller directly to inquire whether an offer had been received, a REALTOR® should never contact another person’s client.
NEW CODE OF ETHICS REQUIREMENT
Effective January 2019, the following will be added to Standard of Practice 1-7: “Upon the written request of a cooperating broker who submits an offer to the listing broker, the listing broker shall provide a written affirmation to the cooperating broker stating that the offer has been submitted to the seller/landlord, or a written notification that the seller/landlord has waived the obligation to have the offer presented.”
This important language will create an explicit Code of Ethics violation for a REALTOR® who refuses to provide a written affirmation upon request of a cooperating broker. It also may become one of the most important tools for addressing a buyer client’s legitimate concern that their offer was never presented to the seller.
For a wide variety of reasons, it is never acceptable for a REALTOR® to not present a buyer’s offer for their seller’s consideration. In addition to the clear violations outlined above, it is a breach of all parties’ faith in the legitimacy in the real estate sales process. It gives everyone in the profession a bad name. While I will continue to believe that this is more of a “perceived” problem than an “actual” problem, to the extent REALTORS® or their clients become aware of this behavior and have some reasonable basis to support the allegation, I would encourage all parties to utilize the various recourse outlined in this article.