BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Signing Expired Offers or Counter-Offers
Q: I recently wrote an offer for my buyer and presented it to the listing agent. After the offer had expired, the listing agent delivered the offer, signed by the seller, to me. My buyer is now interested in a different property, and doesn’t want this property any longer. Listing agent says we have a deal, because seller signed before the expiration of the offer. Do we have a contract?
A: In a word: No. Good question, though. It comes up frequently.
A seller cannot accept an expired offer. If the seller signs the offer but it is not delivered to the buyer or buyer’s agent until after it has expired, then there is no contract. This is true also of counter-offers. If a counter-offer has expired before it is signed and delivered to the sending party, no contract has been formed either.
See Weekly Practice Tip “What Constitutes Acceptance of a Contract?”
PRACTICE TIPS:
1. Buyer Agents: If a seller signs, accepting your buyer’s offer, with no counter, and delivers it after it has expired:
A. If your buyer doesn't want the contract, ignore it because no contract has been formed. Email the listing agent and advise that there is no contract because the Seller’s acceptance was delivered after the offer expired and, by the terms of your buyer’s offer, it had expired before the signed offer was delivered and personally received by you or your buyer.
B. If your buyer wants the property, write in the margin “Accepted, Dated __________, Buyer(s) signature(s)”, then promptly deliver it to listing agent and open escrow. Essentially your buyer is treating the seller’s signature, and the language in the Acceptance portion of the Purchase Agreement, as an offer to sell on the terms of the original offer.
C. Or, your buyer can counter it (on a counter-offer form which incorporates the terms of the original offer), and it is like any other counter-offer.
2. Listing Agents: If you are a listing agent and you are not able to deliver a signed offer from your seller to the buyer’s agent before it expires, or if your seller intends to issues a counter-offer anyway but can’t do so before the expiration of the buyer’s offer, then good risk management would be to write in a seller’s counter-offer a paragraph which reads:
“Seller and Buyer agree that the expiration date for Buyer’s offer is extended to and through the date of the presentation of this seller Counter-Offer.”
This will preclude any argument later that buyer’s offer had expired and was deemed revoked before seller’s counter-offer and therefore there was nothing in fact to counter. (See e.g., CAR Residential Purchase Agreement language in paragraph 31)
While such an argument by a party trying to get out of performing on the contract may not be the strongest argument (in light of the language in the counter-offer forms stating that, in making the counter-offer, the seller accepts the terms and conditions of buyer’s offer), the above language takes away a party even making such an argument.
3. If your client is responding to a counter-offer after it has expired, use similar language as is recommended above, modified for use with the counter-offer to which you are replying, so as to extend the expiration date of that counter-offer.
4. If there is a question as to whether a contract has been created, advise your client to consult with a qualified California real estate attorney.
More related information:
See Weekly Practice Tips below:
“Use Counter-Offer Forms to Create Contracts”
“Withdrawing and Revoking Counter-Offers”
and/or: CAR Legal Memo “Contract Law and Real Estate Transactions”
WEEKLY PRACTICE TIP: 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.
© Copyright Broker Risk Management 2016 03/11/16