June 17th, 2019 at 2:06 pm

Fact Pattern: I am the buyer’s agent. My buyer, Betty, submitted an offer to purchase to the seller. The seller also received another offer from another set of buyers. In response, the seller issued counter offers asking for everyone’s “highest and best offer.” We submitted our highest and best offer using a Buyer Counter Offer (BCO) form. The other set of buyers did not. They went away.

Multiple Choice Question: Under these circumstances, is the seller now obligated to sell the property to Betty? Pick the best answer.

A. Yes, because Betty submitted the highest and best offer.
B. Yes, if the seller had used a Seller Counter Offer (SCO), but not if it was a Seller Multiple Counter Offer (SMCO).
C. No, because Betty should have simply accepted the seller’s counter offer, rather than submit a BCO.
D. No, because asking for a buyer’s “highest and best offer” is generally understood to be non-binding on the seller.

Answer: Answer A is wrong. Submitting a BCO is the legal equivalent of rejecting the seller’s prior counter offer. Additionally, Betty’s BCO does not create a binding contract unless it’s also signed by the seller.

Answer B is wrong. Betty does not have a binding contract with the seller, regardless of whether the seller used the SCO, which only requires the seller to sign once, or the SMCO, which requires the seller to sign twice.

Answer C is most likely wrong, and Answer D is the best answer. A judge or arbitrator is unlikely to interpret the seller’s counter offer asking for Betty’s “highest and best offer” to mean that the seller shall be bound by Betty’s response. That language is most likely to be interpreted as nothing more than a solicitation for a new offer. However, sellers and listing agents using a signed SCO to ask for a buyer’s “highest and best offer” may have not considered the confusion that may arise if a buyer simply accepts that SCO and tries to argue that there is somehow a valid contract. Sellers and listing agents are well-advised to use an SMCO, not SCO, when asking for buyers in a multiple offer situation to submit their “highest and best offers.”

-Thank you to Lyle Elliott (Ventura Manager) for suggesting this week’s legal tip.

Copyright© 2019 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of June 17, 2019. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.

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