When you’re ready to buy a home, your REALTOR can write up a purchase offer for you and present it to the seller’s real estate agent. If all goes according to plan, that offer will then be presented to the seller. But what if it isn’t?!
I just read an interesting legal review outlining the responsibility of a real estate agent in presenting offers to their clients, and the potential consequences if that doesn’t happen.
It’s important for you to know that it is incredibly rare for a real estate agent to intentionally hold back an offer from their client. All real estate agents are required to work in the best interest of their clients. In fact, they have a legal fiduciary responsibility to do so.
This means agents are not allowed to gain an advantage over their clients or put clients' interests second to their own. Failing to present an offer violates this duty and could constitute fraud, dishonest dealing, incompetence, or substantial misrepresentation, all of which may result in the Real Estate Commissioner suspending, delaying renewal, or permanently revoking an agent’s real estate license at any time.
However, if an offer is considered “patently frivolous” (a legal term) then the real estate agent doesn’t need to bother their client with it. The trick is knowing which offers are patently frivolous. I tell my agents to imagine themselves standing in front of a judge to defend themselves for not presenting an offer, and the plaintiff is the judge’s favorite nephew. If a property is listed at $500,000, is $250,000 frivolous? How about an offer for$400,000? Where’s the line? Since there is no way of knowing how a judge will rule, I recommend that real estate agents present all offers. There’s really no reason not to. The seller can always reject it.
Every now and then, an agent will push ethical and legal bounds on presenting an offer so he can slip his offer in instead, earning the commission on both sides of the transaction—from the buyer and the seller. It’s not ethical, but it happens.
Sometimes, a buyer’s REALTOR will ask that the seller initial the “Rejection of Offer” space on the contract. There is no legal requirement that the seller initial it to make a rejection effective. It’s really more of a courtesy.
However, the National Association of Realtors Code of Ethics states that a listing broker or agent is required to confirm in writing that an offer was submitted to the seller if the cooperating broker who submitted the offer requests it.
The only justification I think a REALTOR has for not showing every offer to their client. If the seller says they don’t want to look at offers below a certain dollar amount—and they put the request in writing—then a REALTOR can decline to share those offers. I advise against sellers doing this. In my book, there are three ways to respond to any offer. You can accept or counter an offer, but to reject it outright is silly. There’s almost always room to negotiate. Just recently, I bought a four-plex. The seller wanted a certain price and was adamant about selling the property as-is. I made an offer that called for$20,000 worth of work and they agreed. Rejecting an offer without first countering slams the door closed unnecessarily.
Even if an offer has already been accepted, a REALTOR still has to present offers that come in. This is because until an escrow closes, there’s no telling how a transaction will go and it’s important for sellers to know about other offers. REALTORS must even present oral offers, regardless of when they come during the selling process.
As I was reading the legal review, I noticed that some information cited my old UC Berkeley professor, Marvin Starr. This guy was kind, funny, and so knowledgeable. At the beginning of the course, he told us students that everything in the test was in the book; it was standing room only in his class anyway. Five years later, I needed help with a real estate problem, and I got to reconnect with him. He was as smart, kind, and funny as ever.
If you have questions about property management or real estate, please contact me at [email protected] or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery. To see previous articles, visit www.selzerrealty.com and click on “How’s the Market”.
Dick Selzer is a real estate broker who has been in the business for more than 45 years.
