There Is A High Probability That I Will Be Bringing In An Offer Tomorrow That Will Make Everyone Happy
By David Hamerslough
September 4, 2018
The home you just listed received an offer, and the seller has issued a counteroffer. The counteroffer expires today. There is no confidentiality with respect to the offer or counteroffer. An agent contacts you and asks whether the property is in contract. You advise this agent that there is a counteroffer pending and you provide the agent with enough information to understand what it will take to better the outstanding counteroffer. The agent tells you that the potential buyer is very interested in the property and there is a “high probability that I will be bringing in an offer tomorrow that will make everyone happy.” You ask the agent what that statement means and are told that the prospective buyer has a strong desire to purchase the property. The agent wants to present the offer tomorrow. You ask the agent if that presentation can be made today before the counteroffer expires, and the agent says that will not be possible due to the prospective buyer’s schedule.
What should you, as the listing agent, do in this situation? Is this a conversation that can be ignored because there is no actual written offer or because there is no guarantee there will even be an offer? Is this a conversation that should be disclosed to the seller? Should it be disclosed to the first buyer? Should you discuss this information with the seller before talking to the first buyer? What is the mechanism for revoking the counteroffer, if that is what the seller wants to do? To what extent are the answers to these questions impacted by any dual agency?
Let’s examine what you may consider if this situation arises (with the assumption that no one in your brokerage represents either of the potential buyers and thus there is no dual agency involved). In most circumstances, you should not ignore this type of information. You should contact the seller immediately to advise them of their options and the consequences and risks associated with those options. The seller’s options include (1) ignore the information and potentially leave money on the table, (2) provide the information to the first buyer and use it to either motivate that buyer to accept the counteroffer or induce a bidding war (depending on the seller’s motivations), (3) revoke the counteroffer and risk losing the first buyer (with the additional risk that you may never receive an offer from the second buyer after all), or (4) do nothing and see if the first buyer accepts the counteroffer.
The decision the seller must make will be impacted by, among other things, (1) their needs, (2) their motivation if they decide to provide this information to the first buyer, (3) the price and other terms (e.g., contingencies, close of escrow) of the first transaction, (4) what impact this transaction may have on the seller’s next purchase, if any, (5) the uncertainty of the terms (e.g., price, contingencies, close of escrow) that may be contained in any second offer, (6) what information you may already have from the first buyer as to the likelihood of that buyer accepting the counteroffer, and (7) the likely reaction of the first buyer to the information and how it is presented to that buyer (if the seller authorizes you to disclose it).
If the seller does not want the information disclosed to the first buyer, do you have to disclose it anyway? In the absence of a dual agency, the answer is no.
If your seller instructs you to revoke the counteroffer, it is important to realize that the counteroffer can be revoked orally as long as that revocation occurs before acceptance is delivered as specified in the contract, but the timing and content of an oral revocation is difficult to prove.
While an oral revocation may be legally enforceable, confirming that revocation in writing eliminates any potential dispute that might arise if the first buyer accepts the counteroffer and then claims that delivery occurred before they received the oral revocation. The best way to do that is to have the seller confirm in writing that their counteroffer has been revoked as of the date and time of your oral revocation and you forward the seller’s written confirmation to the selling agent.
In both of these instances, documenting the discussions you have with the seller and the decision the seller has made may eliminate any disagreement in the future if the seller regrets that decision.
The existence of a dual agency relationship raises additional issues that can cause your motivations and loyalties to be questioned depending upon who you communicate with at any given time. For example, if your brokerage represents the seller and the first buyer, is the information provided by the second buyer information that must be disclosed to the first buyer? Is this information imputed because of the dual agency? Unless you can characterize the information as relating to price or have an agreement otherwise limiting what information needs to be transmitted, the information you have received should be provided to the first buyer or might be imputed based on the dual agency.
Another potential problem arises if information about the second buyer is provided to the first buyer before you have had the opportunity to discuss it with the seller, advise the seller of the options they have, and give the seller the opportunity to revoke the counteroffer. If it turns out that your communication prompts the first buyer to accept the counteroffer before the seller has a chance to revoke it, the seller will argue that you have breached your fiduciary duty to them and did so to enable your brokerage to profit. This may well be an example of a situation where it is impossible to meet your fiduciary obligations, but this may also be a situation where the seller should be able to make a decision without being deprived of the opportunity to do so.
On the other hand, if your brokerage represents the seller and the second buyer, you do not have an instruction to withhold the information from the first buyer, the first buyer does not accept the counteroffer and the second buyer does not present an offer that makes everyone happy, the seller is going to ask you how both buyers have been lost and question how that could have been avoided (i.e., by motivating the first buyer to accept the counteroffer because of the potential competition of the second buyer).
The timing of any of these discussions is easily illustrated by written logs detailing the contents of phone calls (not just the existence of a phone call on your bill) and text messages. Once again, documenting your discussions will help eliminate any disputes in the future about when discussions took place and what instructions were given. I have had cases where phone records and text messages have established the sequence of discussions and raised interesting questions about whether fiduciary duties have been met. The absence of documentation regarding the discussions has allowed all parties to claim that they were not advised of important information and given the opportunity to make informed decisions.
At first blush, the statement that was made by the agent for the second buyer might be one that you would ignore. As with any statement, however, and depending upon the facts and circumstances, consideration should be given to the information that is being provided and the impact on and consequences to your client.
While the facts presented in this article may be unique, what they illustrate is that information that is provided in the course of a transaction can have significance even if your first instinct may be either to ignore it as speculative or react to it as though the suggested offer had actually been made. Doing either, however, without assessing the potential impact of that information on your client’s best interests can be risky, as these facts illustrate. On the other hand, promptly communicating the information to your client, discussing it with them, advising them of the risks and consequences, and documenting those discussions will go a long way toward eliminating those risks.
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