What happens when you have an accepted offer on a property that has a 48-hour right of first refusal clause, and another offer is presented to you that the Sellers would like to accept?

Can you negotiate the second offer?
Yes, you can.

What are your obligations if the Seller would like to accept the second offer?
You must insert language into the second offer that it is subject to release from the first accepted offer. You must continue that language by saying "if the first offer is not released (and you may want to put in a specific date), then this contract shall become null and void and all monies shall be returned to the buyer."

If the seller refuses to insert the above language into the second contract, then you should suggest that he contact his attorney.

If I don't follow these guidelines, have I violated the Code of Ethics?
Yes.

Standard of Practice 1-7 of the Code requires: "When acting as listing brokers, REALTORS^® shall continue to submit to the seller/landlord all offers and counteroffers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing." It also says, "REALTORS^® shall recommend that sellers/landlords 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 or lease."

By presenting and then negotiating the second buyer's offer, the listing broker fulfills the obligation to present all offers and counteroffers until closing. However, if the seller's acceptance of the buyer's offer was not made contingent on the termination of the first offer, the listing broker has an obligation under Standard of Practice 1-7 to recommend that the seller obtain legal advice prior to accepting the second buyer's offer.

If the listing broker makes the recommendation to consult legal counsel, and the seller refuses to do so, then the listing broker has not violated the Code. In either case, the seller now has two contracts to sell the property to two different people-creating the potential for litigation. That risk is why the Code strongly encourages the parties to involve their counsel before considering a second contract.

However, if you insert the language recommended above ("subject to release of the first contract"), you will avoid litigation and a possible violation of the Code of Ethics.

In this ever-changing market, be sure you are representing your client's interests. It's important to stay informed.

See you next week!
Ronnie REALTOR^®

Back to Ronnie REALTOR^® Archive >>