BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Use Counter-Offer Forms, Not Addendum Forms, to Create Contracts
Q: I am a listing agent who received an offer from a co-op broker. My seller liked the offer but wanted to increase the close of escrow from the 30 days in the offer to 60 days to give him time to close on his new home. I didn’t have a counter-offer form, so I used an Addendum form. My seller signed the offer and I returned it with the Addendum form with the only term being the longer escrow period. Oh, and I forgot to check the box that the seller’s acceptance was subject to a counter-offer.
Now, buyer has an attorney who says that we have a contract with a 30-day escrow, and that the Addendum form was not a counter-offer as we intended, but was merely a proposal by seller to extend the escrow, and would not become a part of the contract unless and until signed by buyer and returned to seller. Is she right?
A: That is the danger of not using the proper form at the proper time. The counter-offer form makes it clear that there is no contract until it is signed by the other party and returned to the originating party or their agent. An Addendum form, on the other hand, does not have that language.
How buyer’s argument will play out will depend on a number of things. Did you tell the buyer’s agent that there was a counter offer? Will the buyer’s agent admit that you said that? Did you communicate in any other way that this was to be a counter-offer, perhaps by what else you may have said, or wrote into the Addendum form?
All of these, and possibly other, factors would be considered by a judge or arbitrator as to whether a contract had been formed on the original offer, or on the terms of the Addendum.
By using the wrong form you have created the opportunity for this potentially expensive and time-consuming argument to arise.
PRACTICE TIPS: Remember these rules:
1. Use Counter-Offer forms when you are creating a contract up until you have a ratified contract.
2. Only use Addendum forms:
a. To attach to an offer or counter-offer form to add to or amplify the terms of your offer or counter-offer.
b. To change or modify an existing contract.
3. As a listing agent, be sure that seller checks the “Subject to Counter-Offer” box on the offer.
(PRDS Contract: Seller initials the Counter-Offer paragraph).
4. Always return a copy of the signed offer along with the counter-offer to the buyer’s agent.
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 2013 06/21/13