Some markets have improved sufficiently that we are now starting to see competing buyers pursue garden variety seller re-sales. Sellers seek guidance on how to use the competition among buyers to maximize the sales price. Consider the following scenario. You are the listing agent and responded to First Buyer’s offer with a counterproposal allowing the Buyer to accept the counterproposal through the end of today. A second offer has come in from Second Buyer (who seems as likely to close as First Buyer) with a higher purchase price. Your client likes the second offer better than the first and wants direction from you.
- You should contact the selling agent and rescind the counteroffer.
- You should contact the First Buyer and rescind the counteroffer. (Does your choice between 1 and 2 differ depending on whether the broker working with the buyer is a transaction-broker or a buyer’s broker?)
- Since it is after 5:00 o’clock, First Buyer no longer has the ability to accept the counteroffer. Advise the Seller to accept the second offer.
- Since you have not yet received notice of First Buyer accepting the counteroffer, there is no contract with First Buyer. Advise Seller to accept offer number two. By accepting offer number two, it voids any ability of First Buyer to create a contract.
- Since First Buyer has not yet communicated any acceptance of the counterproposal to you, advise Seller to accept offer from Second Buyer. If First Buyer later accepts the counterproposal, it will be a contract in backup position to contract number two.
Answers 3, 4 and 5 are clearly wrong. By responding with a counterproposal, your seller has given the First Buyer the “power of acceptance” through the acceptance deadline in the counterproposal. The second answer is also not correct. Reaching out to a buyer who is already working with a broker raises possible sign crossing violations. The first answer is the best among the choices, but the answer belies the complexity of these situations.
Suppose First Buyer has signed, or claims to have signed the counter before the listing broker communicates the rescission to the broker working with the buyer? The Real Estate Commission approved counterproposal form states: “This Counterproposal shall expire unless accepted in writing by Seller and Buyer as evidenced by their signatures below and the offering party to this document receives notice of such acceptance on or before ___________. If accepted, the Contract, as amended by this Counterproposal, shall become a contract between Seller and Buyer.” Thus, mere acceptance of a counterproposal does not form a contract. Seller must receive notice of such acceptance before the Acceptance Deadline in the Counterproposal. The Real Estate Commission approved contract form, in section 31.1, provides that notice to the broker working with a Seller is notice to the Seller, regardless of the agency status of that broker. Section 31.2 provides options for notice such as fax and e-mail.
These situations tend to play out with more complications. What if there has been an e-mail delivered to the listing office which has been read by the receptionist of the listing office? What if the e-mail of the notice of acceptance has been delivered to the listing office, but not read by anyone? Does 31.1 have any meaning if a contract has not yet been formed? In light of the ambiguity surrounding the answers to these questions, the Seller would not want to accept offer number two until he verified that he was not bound by contract number one and until he revoked the power of acceptance in First Buyer.
If multiple offers can be anticipated, the simplest means to play buyers off against each other is to not send out counterproposals, and to instead ask the competing buyers for their highest and best offers by a certain date. The “highest and best” protocol avoids the seller creating the power of acceptance in any buyer.