Multiple Choice Question: Why do people frown upon seller counter offers (SCO or SMCO) that ask for buyers to submit their “highest and best” price? Pick the best answer:

A. The law requires the essential sales terms to be clear.
B. It’s an NAR Code of Ethics violation.
C. It doesn’t move the parties closer together in the negotiations.
D. The buyer can just accept the seller counter offer as written. 

Answer: Answer A is wrong. The law does require the essential sales terms of a contract to be reasonably ascertainable. However, the “highest and best” language is on a counter offer, not a contract. It is not illegal to ask for “highest and best.”

Answer B is wrong. Agents do have certain requirements to cooperate with other agents under the NAR Code of Ethics. However, there is no specific prohibition against asking for “highest and best.” Additionally, the Code of Ethics applies to Realtors, not sellers. A seller counter offer reflects what a seller is doing, and not necessarily what the listing agent is doing.

Answer C is the correct answer! Agents generally believe that the process of submitting offers and counter offers will move the negotiating parties closer towards forming a binding contract. But asking for “highest and best” after the buyer has already submitted an offer price does not really move the parties closer together.

From a buyer’s perspective, it’s usually not very easy to figure out what price to offer to begin with. Asking that buyer for “highest and best” essentially forces the buyer to “figure it out again,” without any guidance as to how much the seller wants. Buyers get frustrated, because they feel they are just negotiating with themselves, rather than with the seller. It’s not illegal to do, but it’s generally not well-received by buyers or buyers’ agents.

Answer D does happen occasionally, but it’s not the correct answer because it’s not the reason that people frown upon “highest and best” counters. Let’s say, for example, a buyer submits an offer for $1 million, and the seller issues an SCO or SMCO for “highest and best.” The buyer could just accept the seller’s counter as a way to to confirm that the $1 million was the buyer’s “highest and best” price. For an SMCO, the buyer’s acceptance is not binding, given that the seller has to sign again. For an SCO, it’s highly unlikely that the buyer’s acceptance creates a binding contract, given the seller’s clear intent for the buyer to submit the buyer’s “highest and best” price using a Buyer Counter Offer.

-Thank You to Hamid Kharrat (Tustin Office) for suggesting this week’s legal tip!

Copyright© 2024 Shared Success Center, LLC (serving HomeServices of America companies). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of October 14, 2024. 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. Written by Stella Ling, Esq.