A FUNNY THING HAPPENED ON THE WAY TO THE CONTRACT

A FUNNY THING HAPPENED ON THE WAY TO THE CONTRACT

(a) The First Call

A week or so ago I received a call from someone asking me to send a letter to a realtor “terminating” whatever relationship they may have had. She explained that she and her husband were unhappy with the service they were receiving, and, particularly incensed with what they perceived as a lack of assistance in acquiring a specific property. They wanted to make an offer but lacked confidence that it would be timely made thereby leaving them behind another interested buyer. They wished to make an offer through another realtor.

After getting permission to preserve my professional relationship with the first realtor by advising her of the “nasty gram” she was about to receive, I sent the letter. I also spoke with the new realtor to alert her that while I saw no problem with her making the offer on behalf of her new clients that, in my opinion, a commission fight may be in her future. We both agreed that such an issue would not occur unless her new clients’ offer was accepted over the other possible buyer. She decided to approach it with an “I’ll cross that bridge when I get to it” philosophy.

A week or so later I was on the phone with the new realtor about another transaction, so I inquired as to the status of the matter. She told me that her clients didn’t get the property. Apparently the sellers chose the other offer.

(b) The Second Call

Another week went by before I got a call from the husband of the woman who first called me. He tells me that he’s found out that he and his wife’s offer was for significantly more money with a quicker closing date. He was perplexed as to why he and his wife aren’t the ones buying the home. Did I say perplexed? Livid might be the better word. He wanted blood from realtor #1.

In short, this is what I was told.

1. Mr. & Mrs. made an offer to purchase their home many months ago. Before doing so, they acknowledged the dual agency relationship with the realtor. Their offer was rejected.

2. Mr. & Mrs. continued to look for other homes but always kept their eyes on this one. They would occasionally get updates from the realtor, but, more often than not, they would be the instigator of the communications. In retrospect, they were most bothered by the fact that they weren’t informed about price reductions along the way.

3. The first round of the recent “competing” offers occurred close in time, maybe the same day. Mr. & Mrs. offer was better than the other possible buyers.

4. The other possible buyer then counter-offered at a price curiously close and just above their offer. It was accepted and contracts were promptly prepared and signed.

5. The next day, while the parties were still under attorney review, Mr. & Mrs. made another offer, at a substantially better price with a quicker closing date. In all other respects the offers were comparable.

6. One of the two sellers initialed her receipt or acceptance on the offer sheet. The other was out of town. Its unknown if she returned during the attorney review period.

7. The sellers intend to sell the property to the buyer who offered less money and a later closing date.

Now for some questions

What, if any, affect did the “termination” letter have? Mr. & Mrs. changed from a “client” (person with whom the REALTOR® or REALTOR’S® firm has an agency or legally recognized non-agency relationship) to a “customer” (party to a real estate transaction who received information, services, or benefits but has no contractual relationship with the REALTOR®) Code of Ethics and Standards of Practice of NAR, Article 1, Standard 1-2. We note, however, that a REALTOR’S® obligation of absolute fidelity to its client’s interest does not relieve the licensee from the obligation of dealing fairly with all parties N.J.A.C. 11:56.4(a).

Was Mr. & Mrs. last offer a back-up offer? No, the term “back-up offer” means a written and signed offer to purchase an interest in real estate which is received by a licensee at a time when a previously executed contract pertaining to the same interest in real estate is pending and in effect, having survived attorney review if it was subject to such review. N.J.A.C. 11:5-6.4(b)1. In our example, the contract had not survived attorney review.

What should have been done with Mr. & Mrs. last offer? Offers obtained while previously executed contract is still pending attorney review must be presented in the normal course (24 hours after receipt). N.J.A.C. 11:5-6.4(h)(g)and (f)1.ii We also note that it is required standard practice for a listing broker to continue to submit the seller all offers and counter-offers until closing unless the sell has waived this obligation in writing. Standard of Practice 1-7; N.J.A.C. 11:5-6.4(h)(g)and(f)1.ii

Should the realtor have recommended the seller get legal counsel? We think so. REALTORS® shall recommend that sellers obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract. Code of Ethics and Standards of Practice of the NAR, Article 1, Standard 1-7. Furthermore, it is the duty of a licensee to recommend that legal counsel be obtained whenever the interest of any party to a transaction seems to require it. N.J.A.C. 11:5-6.4(h)3(i)

(c) The Third Call…hasn’t come in yet.

#1 This is one-sided information, none of which has been verified. I use it only for illustration purposes in this article.

-Dan Posternock

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