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Multiple Offers and the Statute of Frauds

A cooperating broker verbally accepted my buyer-client’s offer over the phone last night, and told me she would email me the signed offer in the morning. When I spoke to the listing broker today, she informed me that her seller had accepted another offer. My buyers are so upset! Isn’t that a breach of contract?

No. Offers are not binding until they are signed by both the buyer and the seller. In order for a contract for the sale of land in Massachusetts to be enforceable, it must comply with the statute of frauds (M.G.L. chapter 259 section 1), which states that no action shall be brought upon a contract for the sale of real property unless it is in writing and signed by the party “against whom enforcement is sought.” Until you receive an accepted offer signed by the seller, technically no agreement exists. If the seller accepts another offer, even after verbally accepting your buyer’s, the agent has probably not acted unethically. 

Under Article 1 of the National Association of Realtors® Code of Ethics, Realtors® are required to promote and protect their client’s best interest. In addition, Standard of Practice 1-7 specifies that listing brokers shall continue to submit offers until closing unless otherwise instructed by their clients. If the seller receives other offer(s) after he or she verbally accepts your buyer’s, the agent has a duty to submit those offer(s), and the seller has the right to accept it. Many brokers cry foul and state that they would have gone back to both buyers and asked for their “best and final” offers.  While this is common, it is not required.  In this scenario, the listing broker probably acted in their client’s best interest by presenting all offers and ensuring the seller accepted the best one for them. If you receive a verbal acceptance, you should be sure to communicate to your buyer that it is not binding until it is memorialized in writing.

My seller clients have received offers from two different buyers.  They now want to counter both of them in writing.  Is this permissible? 

While a seller is legally permitted to counter more than one offer at the same time, doing so is not advisable. If the seller counters in writing both offers and each counter is accepted before the seller is able to communicate an intent to withdraw her counter to one of the two buyers, the seller could be bound to two written contracts and thus have potential liability to those buyers. Even if not in writing, verbal acceptance of both offers could likely raise questions as to whether the seller is negotiating in good faith and treating the buyers fairly.

It is important in any multiple offer situation that the seller understand their options. Explaining these options ahead of time and working with the seller to develop a strategy that fits their needs and preferences is always a good idea.  The seller can accept one offer and reject others; they can reject all offers as presented, and make a counteroffer to one; they can reject all offers and continue to market the property to other buyers; or they can reject all offers and give all buyers an opportunity to submit another offer as their “highest and best offer.”

I am the listing broker of a property that has received multiple offers. One of the offers is a full price, no contingency (cash) offer.  Is the seller required to accept that offer? 

No. By simply placing a house in the multiple listing service or an advertisement in the paper, the seller does not create a unilateral contract that requires him to sell his or her property for the asking price. A full price, cash offer, therefore, does not create a contract between the seller and prospective buyer.  In a seller’s market multiple full price offers can come in and the seller may wish to seek a higher price.  If this is the case, make sure your seller understands that if he is attempting to create a bidding war, all prospective purchasers could abandon the property. 

For additional information on multiple offers, we also recommend reading the NAR white paper entitled “Presenting and Negotiating Multiple Offers” which has suggestions on how to handle these situations.  This document may be found at www.realtor.org, just enter the title of the paper in the Search feature.

Legal Alert was written by MAR General Counsel Michael McDonagh and MAR Staff Attorney Ashley Stolba