LEGAL HOTLINE ARCHIVE
Appraisals

Q. The Realtor lists property for sale for an out of state owner. An offer is made on the property and the offer is presented verbally by telephone to the owner by the listing agent. The Seller accepts the terms of the offer, however counters that the Buyer must provide proof of pre-qualification within three days. Fax services are not available to quickly get the offer in the Seller’s hands for signature, but the original contract is mailed that same day to the owner for signature.

The very next morning (before the original contract has had time to have been received in the mail), the Buyer backs out of the contract, and requests his deposit be refunded. The Seller wants to retain the Buyer’s deposit.

Questions:

1. Can the Seller legally retain the Buyer’s deposit?

2. Does verbal acceptance of an offer constitute a legally binding contract given the fact that the agent has promptly placed the contract in the mail to the owner following verbal communication?

3. Was in fact [there] not an "accepted contract" in that the Seller instructed the agent to write in the contract the language concerning the Buyer pre-qualifying?

4. Can the Seller entertain and negotiate a back-up offer which had been presented in the meanwhile?

5. Does the Agent simply attempt to get mutual consent forms signed by the parties and if the owner refuses to sign deposit the deposit with the Louisiana Real Estate Commission?

A. Questions 1 and 5: If you do not have the mutual written consent of all parties regarding the disposition of the deposit, including the Buyer, you should not release the deposit to the Seller. The pertinent regulation from the Louisiana Real Estate Commission ("Commission") provides that if a broker has knowledge that a dispute exists as to the ownership or entitlement of a deposit held in a sales escrow account, it is the obligation of the broker to immediately notify in writing all of the parties involved in the dispute, and within 90 days of the determination that a dispute exists, the broker should do one of the following

Release the deposit funds upon the written and mutual consent of all of the parties involved;

Through a concursus proceeding, deposit the funds into the registry of any court of competent jurisdiction and proper venue; or

Deposit the funds, including any promissory notes, with the Commission, along with a request for an escrow disbursement order, which request shall include the names and last known addresses of the principals to the agreement, a copy of the purchase agreement, and copies of any other documents which may have some bearing on the dispute.

Question 2: Generally contracts affecting real estate must be in writing. Louisiana Civil Code article 1839 provides that a transfer of immovable property must be made by authentic act or by an act under private signature. Generally an offer for the purchase of a thing can be accepted by any method expressing consent unless the offer specifies a particular method of accepting the contract. Many purchase offer forms require that the offer be accepted in writing. Further, if the offer is made in writing an acceptance in writing may also be implied. It may be difficult to enforce a "verbal acceptance" of a contract because problems of proof will be apparent.

Question 3: We cannot give a legal opinion without reviewing the exact wording of the Buyer’s offer and the revisions to the offer made by the Seller. Generally, though, the Buyer has the right to reject any counteroffer which revises his/her original offer to purchase in any way. These revisions transform the Seller’s acceptance (viewing the purchase agreement as an offer) into a counteroffer and, therefore, the Buyer must consent to the counteroffer before the contract is binding. An acceptance not in accordance with the original offer is deemed to be a counteroffer. See Louisiana Civil Code Article 1943.

Question 4: Yes, the National Association of Realtors Code of Ethics, Standard of Practice 1-7 ("SOP") provides that a listing broker shall continue to submit all offers until closing unless the Seller has waived this obligation in writing. The SOP goes on to provide that a realtor shall not be obligated to continue to market the property after an offer has been accepted by the Seller, and that a realtor shall recommend that the Seller obtain the legal advice of counsel prior to acceptance of subsequent offers except where the acceptance is contingent on the termination of a pre-existing purchase contact. If this SOP is not in conflict with local law, it is a realtor’s duty to abide by it.

The Louisiana Real Estate license law provides that a licensee may be censored, suspended, etc. by the Louisiana Real Estate Commission for failing to reduce a bona fide offer to writing when a proposed purchaser requests that a written offer be submitted. Presumably, this would apply even if the licensee is aware that the owner has accepted a prior offer in writing (as long as the sale has not closed), so long as the proposed purchaser requests that it be forwarded.

The Commission’s regulations provide that all bone fide written offers for the purchase of real estate shall be submitted to a Seller when such offers are received prior to the broker or his representative having knowledge that the Seller has accepted an offer in writing. A Commission representative has confirmed to us the Commission’s view with respect to the offer received after the licensee has knowledge that the owner has accepted a prior offer in writing (assuming the sale has not closed, and assuming the proposed purchaser has not specifically requested that the subsequent offer be submitted) is that the licensee has a choice of whether to forward such offer.

Hence, since the Commission’s interpretation of local law is not in conflict with the SOP, the SOP has the necessary guidance. A realtor should remember three things: (a) he/she continue to submit backup offers until closing (unless the obligation is waived in writing by the Seller); (2) he/she is not obligated, under the Code of Ethics or law, to continue to market the property after the offer has been accepted; and (3) he/she shall recommend that the Seller obtain the legal advice of counsel prior to acceptance of a backup offer unless such acceptance is contingent upon the termination of the pre-existing contract.

Therefore, presentation of backup offers may be required unless waived in writing by the Seller. Backup contracts can be valid, binding contracts that become effective upon termination of a pre-existing accepted purchase offer.

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All responses featured in the Hotline Archive are time sensitive. They reflect the law, regulations and ethical considerations in effect at the time of the response. Responses to the legal questions should not be construed as specific legal advice, nor are they designed to cover every aspect of a legal situation.

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