Legal Quiz: Handling Multiple Offers

8/18 Insight: Legal Quiz - Multiple Offers resource header

8/18 Insight cover imageSome of the issues addressed in this article are not unique to multiple offer situations, but often arise in such situations.

By: Will Martin, General Counsel

Question: The existence of multiple offers is a material fact that a listing agent must always disclose.  True or false?

Answer: False. Material facts include facts about the property, facts affecting the property and facts affecting the ability of a broker’s principal to complete a transaction. The existence of another offer does not fall into any of those categories. However, in order to maintain a so-called “level playing field” between competing buyers, if one of the competing buyers is aware of the existence of the multiple offer situation, the Real Estate Commission would expect the listing agent to disclose that fact to the other competing buyer(s).

Question: If asked by a buyer agent if there are other offers, the listing agent is ethically obligated to always disclose the existence of other offers.  True or false?

Answer: False. According to the REALTOR® Code of Ethics, the listing agent must have the seller’s approval to disclose the existence of offers on the property. If the seller doesn’t approve, such disclosure would be unethical. On the other hand, if the seller does approve of disclosing the existence of other offers, the listing agent would be ethically required to do so if asked by a buyer agent. See Standard of Practice 1-15 of the Code.

Question: If a listing agent discloses to a buyer agent that there are other offers on the property and the buyer agent asks if the listing agent or another agent in the listing agent’s firm represents any of the other buyers, the listing agent must answer the question.  True or false?

Answer: True. See Standard of Practice 1-15.

Question: It is permissible for a listing agent to disclose a term or terms of a buyer’s offer to a competing buyer so long as the seller directs the listing agent to do so.  True or false?

Answer: False. Disclosing the price or other material terms in a party’s offer to a competing party without the express authority of the offering party is a violation of Real Estate Commission Rule 58A.0115.

Question: A buyer agent has the right to present an offer directly to the seller unless the seller objects in writing, in which case the buyer agent has a right to a copy of the seller’s written instructions.  True or false?

Answer: True, assuming the property has been listed in MLS. See NAR Model MLS Rule 2.3. A listing agent has an analogous right to present a counteroffer directly to the buyer. See NAR Model MLS Rule 2.4.

Question: In a hot real estate market where there is increased competition for fewer homes, it is a good idea for a buyer to include a letter with his or her offer to distinguish the offer from other offers. True or false?

Answer: False. Although a buyer letter, or “love letter” as they are sometimes called, can be legal, we think buyers should be discouraged from submitting letters with their offers because they raise concerns with potential violations of fair housing laws. For example, assume a multiple offer situation involving two buyers who submitted offers containing similar terms. Buyer #1, whose offer was rejected, is of a different national origin than the seller, while successful Buyer #2 shares the same national origin with the seller. Buyer #2 submitted a letter with her offer that revealed her national origin. If Buyer #1 discovers these facts, he may point to the letter as some evidence that the seller took Buyer #2’s national origin into account in deciding to accept her offer, which would be a violation of state and federal Fair Housing laws.

However, as mentioned above, it is not per se illegal for a buyer to submit a letter with an offer. If a buyer insists on including a letter, care should be taken to focus on features and benefits of the home itself and avoid specific needs of the buyer or other information that may be related directly or indirectly to a characteristic that is protected under the Fair Housing laws. And although a carefully-drafted buyer letter may be legal, a seller may consider not accepting it in any event to avoid even the appearance that the seller’s decision-making may have been influenced by the contents of such a letter for an illegal reason.

Question: Assume three buyers have submitted offers on the same property. Offer #1 is a low-ball offer, but offer #s 2 and 3 are within the realm of what the seller might consider accepting.  Since it’s the seller’s prerogative to accept, reject or ignore any offers, it is permissible for the listing agent in this situation to contact the agents representing buyer #s 2 and 3 to request that their clients submit their best offers and not to respond to the agent for buyer #1. True or false?

Answer: False. Although the listing agent doesn’t have to invite buyer #1 to submit another offer, fairness dictates that the listing agent must at least contact buyer #1’s agent to let him or her know that buyer #1’s offer has been rejected by the seller.  Of course, if buyer #1 submits another offer, the listing agent must present it to the seller. In addition, if the listing agent discloses the existence of multiple offers to the agents for buyer #s 2 and 3, the listing agent would be obliged to disclose that fact to the agent for buyer #1.

Question: An offer to purchase becomes binding only after the party to whom the offer is made signs it without any changes and a signed copy is delivered to the offering party.  True or false?

Answer: False, assuming the offer itself does not require that a signed copy be delivered as a condition of the offer becoming a binding contract. According to the Offer to Purchase and Contract, the offer becomes binding on the Effective Date, which is defined in paragraph 1(g) as the date that the party to whom the offer or counteroffer is made signs or initials it, and such signing or initialing has been communicated to the offering party. Although delivering a signed copy of an accepted offer certainly constitutes communication of acceptance, it’s not required by law, which permits communication of acceptance by any usual means of communication, oral or written. For example, a phone call from the listing agent to the buyer agent confirming that the seller has signed the buyer’s offer would constitute acceptance.

Question: Buyer agent A submits an offer to listing agent B.  After presenting the offer to her client, listing agent B emails buyer agent A to say that the seller will accept the buyer’s offer if the buyer is willing to increase the purchase price by $10,000.  After contacting the buyer, buyer agent A replies to listing agent B’s email stating that the buyer accepts the seller’s counteroffer. The property is under contract.  True or false?

Answer: False, assuming that buyer agent A does not have actual or apparent authority to bind the buyer to a contract. The standard buyer agency agreement does not confer authority on the agent to bind the client to a real estate contract, and absent any other agreement, such as a power of attorney, granting the agent that authority, buyer agent A does not have actual authority to do so. Absent evidence that the buyer held buyer agent A out as possessing authority to bind them to a contract or permitted buyer agent A to represent himself as having such authority, buyer agent A does not have any apparent authority to bind the buyer to a contract either. See the 2012 Court of Appeals case of Manecke v. Kurtz, available on the NC Courts website at under Court Opinions/NC Court of Appeals opinions/2012/August 21.

Note that even if buyer agent A did have actual or apparent authority to bind the buyer to a contract, the facts presented do not indicate that the seller had changed the offer to reflect the increased purchase price and initialed the change, or that listing agent B had actual or apparent authority to negotiate a contract for the seller. Thus, listing agent B’s email likely did not constitute a counter offer that could have been accepted by buyer agent A on the buyer’s account anyway.

Question: If a listing agent in a multiple offer situation advises the buyer agents for the competing buyers in writing that it is a multiple offer situation, and advises them to submit their highest and best offers, it would be okay for the seller to accept an offer that does not have the highest price.  True or false?

Answer: True. A seller is free to accept any offer they may choose to accept based on the consideration of matters other than price. However, it is recommended that a listing agent who invites a buyer to submit another offer should simply ask for the buyer’s “best” offer rather than the buyer’s “highest and best” offer. A rejected buyer who later discovers that the seller sold the property to another buyer for less money than was offered by the rejected buyer may claim, to borrow a famous phrase, that something “is rotten in the state of Denmark,” and that he should have gotten the property since his offer was the highest. The rejected buyer may well be angry in any event, but the listing agent’s use of the phrase “highest and best” may not help matters.

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