• Posternock Apell, PC

Rules Of The Game: Duty To Submit Offers


This month we propose a topic that garners much discussion because it is fraught with serious consequences when not properly followed.

We start with N.J.A.C. 11:5-6.4(g) and select words of emphasis

If any offer on any real property or interest therein is made orally, the licensee shall advise the offeror that he is not obligated to present to the owner or his authorized representative any offer unless the offer is in writing. Unless a writing containing or confirming the terms of the listing agreement otherwise provides, the licensee shall transmit every written offer on any real property or interest therein presented to or obtained by the licensee during the term of the listing to the owner or his authorized representative within 24 hours of receipt of the written offer by their firm. For the purposes of this section, the term of a listing shall be deemed to expire either on the termination date established in the listing agreement, or upon the closing of a pending sale or lease. If any acceptance of an offer is given orally, the licensee shall secure the acceptance in writing within 24 hours. (emphasis added)

not obligated: These words beg two questions: “Can I refuse to submit an oral offer?” and “Should I refuse to submit an oral offer?” I say “yes” and “no” – and, further, that (a) best practices would be to correspond in writing with the other agent to remind him/her of their duty to submit a written offer; and (b) alert your seller of what you’ve been told.

Unless a writing…otherwise provides: The best example I can think of is when the written terms of the listing agreement provide that the seller shall not be presented with offers, written or otherwise, below a certain price or without certain proof of funds or beyond a specific closing date. As a matter of caution, however, it may be a good idea to alert the seller if you receive an offer which did not meet the criteria to allow the seller an opportunity to reconsider the terms of the listing agreement.

by their firm: This, ladies and gentlemen, is a warning for you to always know when offers hit the fax machine in your office or go to an email address you might not consistently rely upon.

upon the closing of a pending sale: Written offers, no matter how late, must be presented. There are additional rules to follow for back-up offers including (a) notifying the seller, in writing, to consult an attorney; and (b) advising the potential purchaser of the pending contract or lease.

secure acceptance in writing within 24 hours: This often overlooked requirement can create difficulties in the event additional offers arrive during the pendency of your communications with the seller. Vacationing, workaholic and reluctant sellers all create impediments to completing this necessary task. I think a brief – but clear – email acknowledgment will suffice while you await something more formal.

You should also recognize that

Unaccepted offers and expired listing agreements during the term of which no contract of sale was executed or no tenancy was entered into shall be maintained by the broker for six months from the date of the offer or the expiration of the listing agreement.

GAME ACTION: This is a slippery slope – even when you’re compliant, as detailed in the below referenced lawsuit.

In Melveney v. McCrane a listing broker who represented the seller was sued where there was a bidding war between the unsuccessful buyers, the Melveneys, and the successful buyer, Sogorka. The Melveneys and Sogorka both sued for tortious interference with an existing contractual relationship and the Melveneys also sued for tortious interference with prospective economic advantage.

In Melveney, Sogorka submitted an offer to the listing broker for $37,000 which the broker forwarded to the owners. The owners verbally approved the offer and a proposed purchase contract was sent to Sogorka. Two days later, the Melveneys submitted an offer to purchase the property for $40,000. The owners then told the listing broker about the Melveneys’ offer, which resulted in Sogorka being “very resentful” but still increasing his offer to $41,000. Negotiations continued back and forth between the potential buyers through the listing broker and a contract ultimately was entered into with Sogorka for $45,000. Suit then was filed and a jury trial resulted in a judgment in favor of the Melveneys against the listing broker for $2,500 and in favor of Sogorka against the listing broker for $8,000. However, the Appellate Division reversed both of these jury verdicts.

The Appellate Division explained that the claims of the Melveneys and Sogorka against the listing broker

should not have been submitted to the jury. The evidence of her activities in regard to the property is abundantly clear and in all essentials undisputed. It bespeaks only an agency relationship between her and her principals, the McCranes [the owners], throughout which she kept them fully informed and, following their instructions, secured for them a purchaser for their property at the highest price obtainable through vigorous competitive bidding.

The Appellate Division concluded that “[s]he cannot be penalized for doing what she was obligated to do.”

The real estate attorneys at Posternock Apell, PC remain ready, willing and able to assist with all of you and/or your client’s real estate questions. We can be reached at danp@mpadlaw.com. We look forward to hearing from you or those you know who may need our advice.

0 views0 comments