BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
CONGRATULATIONS, WE HAVE A DEAL!
Q: I am the listing agent on a home for sale. We had several offers at the same time, but one was better than the others at $10,000 over asking. After the presentation, sellers decided to accept that offer. It was 8:00 p.m. when I called the buyer’s agent and told her: “Congratulations, we have a deal. My sellers have signed your offer. I will deliver the signed offer in the morning and we can open escrow.” Buyer’s agent was thrilled and couldn’t wait to tell her lucky first-time buyer.
She called back ten minutes later and told me that her buyer was ecstatic, since she had to be out of the house she was selling in 30 days. We then talked about opening escrow and scheduling inspections.
Early the next morning, I received another offer e-mailed to me which was $35,000 over the prior offer, more cash down, fewer contingencies, and offering a free 30-day rent-back to sellers which the first buyer was not able to do. I e-mailed it to the sellers who immediately wanted to accept that offer.
I called the first buyer’s agent to tell her that the sellers instructed me not to deliver the signed offer to her and, in fact, the sellers were accepting another offer. She got very angry, saying we had a deal and her buyer would see an attorney. Later that day, I got a call from buyer’s attorney threatening all sorts of legal liability if the buyer did not buy the house. Help!
A: Never forget that there is no “deal” until the contract is ratified. Ratification occurs when the last signed, unchanged offer or counter-offer is DELIVERED AND PERSONALLY RECEIVED by the other agent.
For more details, see Weekly Practice Tip: “What Constitutes Acceptance of a Contract?”
In your case, the error was telling the buyer’s agent that she had a deal when, in fact, there was no deal at that point. You set up a false expectation which leads to your current situation. At a minimum, the buyer is very upset. At worst, the buyer’s attorney takes steps which will require your seller to hire an attorney to fight that buyer and her attorney.
PRACTICE TIP:
LISTING AGENTS:
1. Never tell the buyer’s agent that they have a deal, or that the contract is ratified, until final delivery and personal receipt occurs as specified in the contract.
2. Instead, say something like: “Congratulations, my seller has signed your offer. When I deliver the signed offer to you, we will have a deal. Should I e-mail it, or do you want to come and pick it up?”
BUYER’S AGENTS:
3. Never tell your buyers that they have a “deal” until you actually have a ratified purchase agreement.
4. In the above scenario, no matter what you are told by the listing agent, it is wise to tell your buyer, “The listing agent has told me that the sellers have signed your offer. When I have received the signed offer, we will have a deal.”
5. If the listing agent is not planning to deliver the final document immediately, insist that it be e-mailed immediately. Or, go pick it up. You have nothing more important to do at that moment.
6. REMEMBER: Signing the “Confirmation of Acceptance” in the CAR purchase agreement and counter-offer forms is NOT necessary for the ratification of a contract. It may be evidence of the time when acceptance occurred, but a contract is formed as mentioned above, with or without this paragraph being signed.
DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
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