There’s a saying that listing agents use from time to time, and it goes like this:

“My clients can’t accept what isn’t in front of them.”

It’s a way of trying to convince a buyer agent, whose clients are on the fence or lying in wait, to bring an offer on the property.

You can see how this plays out in various scenarios, right?

Consider the buyer agent who’s posturing, or testing the waters: “Do you think your clients would accept $2,000,000?”

A non-committal answer would be, “Well, my clients can’t accept what isn’t in front of them.”  It’s a nice way of telling the buyer agent to bring the offer, without showing your hand and directly answering the question.

Consider the listing agent who’s out there, grinding away, trying to drum up business, and while trying to avoid sounding desperate, simply offers to the buyer agent, “Look, Jimmy, my sellers can’t accept what isn’t in front of them.”

I use this line all the time, and do so in a multitude of situations.

But know this: even though this is a metaphor, it’s also very true when used in a literal sense, and that is the premise of our story today!

When it comes to the most basic tenets of contract law, you would have to understand that you can’t accept an offer that’s not in front of you – that doesn’t exist.  Right?

Well, there are many times in real estate, sorry to say, when agents do try to accept an offer that doesn’t exist, and it’s usually because of one of two reasons:

1) The agent is ignorant and uneducated, lacking the knowledge required to understand contract law.

2) The agent is looking to cut a corner, be lazy, be sneaky, or be unethical.

I honestly don’t know which one is worse, but let me tell a story today that lays out all the facts, and then you can decide why the agent did what he did…

I have a listing for a freehold property, priced at $1,199,900, which has been on the market since Labour Day.

It’s a fantastic house, and I say that without bias.  The home is located in an area that’s dominated by “unloved” homes, which is to say that my clients have not only taken great care of the home but also have wonderful taste, and the home’s aesthetic benefits from their style.

We received two offers from buyers that seemed to be running around the neighbourhood, lowballing sellers.  To be honest, I don’t blame the buyers.  There are deals to be had out there in this market, and there are a lot of homes that don’t present well and might deserve a lowball.

Our home is not one of those, however.  We rejected two lowball offers without signing them back, which spits in the face of another one of my mottos: “Never let a deal die,” but when somebody offers you $980,000 on $1,199,900, and the buyer agent’s email reads, “We saw twenty houses on the weekend and we’re giving you a CHANCE to sell before we move on to another home,” you know pretty quickly that this isn’t your trade partner.

The third offer that we received on the property was a good one: $1,150,000.

The terms were reasonable, i.e. deposit, closing date, conditions, etc., and we elected to work with the offer.

I called the agent and asked what I always ask: “Where is this offer going?”

A good buyer agent will work around the question, but many agents just like to hear themselves speak.

An agent might say, “Well, my clients want to get the property for $1,500,000, so they offered $1,400,000, thinking that we’d have to sign it back-and-forth at least three times, so that’s our plan.”

I know it’s hard to believe that an agent would offer this, but they do it all the time.

In this case, the buyer agent said, “Let me speak to my clients and I’ll get back to you,” so I figured we had nothing to lose by waiting.

The buyer agent called me back and said, “They’re pre-approved for $1,150,000, but I know that’s not going to do it, so I’ll see if their parents can top them up.”

Once again, I waited.

And once again, he called me back and said, “Okay, I think I can get them to $1,170,000.  If you sign back at that number, I think I can get them to accept it.”

I called my clients and passed the information along.

We weighed the pros and cons of signing back at $1,170,000 and trusting that the buyer agent could get the buyers on board, and we talked about signing back at $1,175,000 or $1,180,000, which assumed that most buyers want the final sign-back.

In the end, the sellers decided to sign back at $1,175,000 and see how the buyers would respond.  They understood the risk in signing back at this number versus any other number, and were completely on board.

We sent the counter offer over to the listing agent, and he responded in two hours with yet another sign back, this one at $1,160,000.

He said, “I tried my best, but now the parents are involved, and they’re telling their kids it’s a buyer’s market and they should be lowballing…”

Who knows if any of that is true or if it’s just negotiation, but in any event, their sign-back to us at $1,160,000 came with a “best and final” notation, and an irrevocable of 11:59pm the next day.

The following morning, I spoke to my clients, who said, “We’re not really in a good position here.  We’re thinking about just accepting the $1,160,000 offer.”

I told them that, given the market in their area, they had to consider it.  But they also had to weigh the risk/reward equation associated with signing back at $1,165,000 or $1,170,000.

They said that they wanted to discuss and that they’d get back to me.

As I waited for my clients to get back to me, I received a text message from the buyer agent:

Any update? 😊

This struck me as somewhat odd, since it was 9:30am and they had given us a “best and final” offer with authority.  We had until 11:59pm that evening, so the text message was very telling.

All of a sudden, I began to believe that the buyer agent was nervous.

A nervous buyer agent is one that you can play with, and so I decided to do exactly that.

I texted back:

Hi Bob, thanks for checking in.  I don’t know what they’re going to do, but I know they’re not accepting $1,160,000.  Full transparency here: we have another agent who said she’s bringing an offer.  And since we have until 11:59pm on your offer, we’re going to take the day to see what happens.  Thx!

This was a bluff, in case that’s not obvious.  We had other showings, but nothing was imminent.  And the sellers were considering the $1,160,000, as I noted above.

But we had absolutely nothing to lose.

Worst case: the buyer agent says, “It’s our best and final, so take it or we walk away.”

Best case: the buyer agent is nervous and lets something slip that we can use to our advantage, or starts to negotiate against himself.

What ended up happening was something both better and worse at the same time.

What happened was something that I have only ever experienced once before in my twenty-one-year career.

About thirty minutes after my text message exchange with the buyer agent, my email chimed.

The subject of the email read:

789 Cherry Blossom Way – Accepted Offer

Um, what?

Speak into my good ear, please and thanks.

How can the offer be accepted when the offer doesn’t exist?

The body of the email read as follows:

Hi David, Congratulations!  The buyers have accepted your client’s counter-offer.  Please send me an acknowledged copy of the APS once your seller’s have signed, as well as a copy of the deposit instructions.  Looking forward to working with you on this transaction!

Now we had a problem.

You see, the buyer agent had his clients “accept” the offer from the previous night; our counter-offer of $1,175,000.

But that offer didn’t exist anymore.  It was nullified as soon as the buyers signed it back at $1,160,000.

You might be asking, “David, isn’t this a good thing?  You got the buyer agent and the buyers to agree to the price that your seller wanted!  And your sellers were about to accept a lower price!”

Don’t get me wrong, I’d love to sell the house for $1,175,000, but we needed to do so legally.

In case any of you don’t follow, let me explain…

We were provided an offer of $1,150,000.

When we signed that offer back at $1,175,000, the offer of $1,150,000 became null and void.

The buyers signed our $1,175,000 offer back at $1,160,000.  The moment that happened, the offer of $1,175,000 became null and void.

The fact that an offer is nullified the moment a counter offer is provided is perhaps the most basic tenet of contract law.

Should real estate agents understand the most basic tenets of contract law?

Absolultey.

So did the agent in this case not know?  Or not care?

I wasn’t sure.

But what I did know was that this was a problem.

I called my seller clients and said, “Guys, I have good news and I have bad news.”

I explained that the buyers wanted to pay us $1,175,000 for the home, and that they tried to put an accepted offer at this price on the table, but that the way they went about it wasn’t legal, and could cause us issues down the line.

“They can’t accept our offer of $1,175,000 from last night because they negated that offer when they signed back to us at $1,160,000,” my client said.

“That’s correct,” I replied.

And in that moment, I realized that my client, who works in computer software, seemed to know more about real estate contracts than the buyer’s agent whom we were working with!

My other client said, “David, what do you recommend we do here?  What are the potential outcomes?”

I explained that while we could simply say “screw it” and work with the accepted offer, which isn’t legal, there’s a 99% chance that the transaction would proceed without issue.  But if, for some reason, the buyer wanted out of the purchase over the next three months, they could argue that the accepted offer wasn’t legal.

We would have their deposit in trust, and this could take years to sort out in court, but ultimately, the courts would determine that the contract wasn’t valid.

No matter how narrow the odds that this would happen, we simply couldn’t risk it.

“I need to explain to the buyer agent that he’s done this incorrectly,” I explained to my clients.  “I need him to understand that we will sign back to them, and they have to accept.”

So I did exactly that.

I called the buyer agent and I said, “Listen, I appreciate that you want to work with us, but that accepted agreement isn’t valid.”

He didn’t understand.

I said, “You’ve accepted an offer that we provided last night, which was nullified the moment you signed it back.”

He answered, “What does it matter?  If a buyer and seller want to make a deal, and they agree, then what does it matter?”

This was the outcome that I was afraid of.

He continued, “Look, you told me that you were getting another offer, and we didn’t want to risk that, so we accepted your offer.  Done and done.”

Yes, he was pulling a fast one.  And to be quite honest, he played right into my hand, since I wanted him to fear a potential competing offer so we could get a deal done.

But not like this.

A buyer can’t accept an offer that a seller hasn’t presented, and in this case, with a $1,160,000 offer on the seller’s table, there was nothing for the buyer to accept.

At this point, I was afraid of losing the buyer.  But my hands were tied.

I couldn’t move forward with the invalid agreement that we had in hand.

So I told the buyer agent, “I’ll tell you what, you’ve put me in a tough spot because you’ve told your buyers that they purchased a home, and we’ve made a mess of it.”

Of course, “we” didn’t make a mess of it, but I wasn’t going to get him agitated and risk his emotions getting the best of him.

I said, “I’ll have my clients sign back to you at $1,175,000, and you can have your buyers accept it.”

He said, “But they’ll ask why they’re signing this.  They think they bought a house.  They’ll wonder what I did wrong.”

I told him, “You have a relationship with your buyer clients.  You know best how to proceed and what to say to them.  I’m going to leave this in your capable hands.”

I had my clients sign the valid $1,160,000 offer back to the buyers at $1,175,000, and presented this valid offer to the buyer’s agent.

Lo and behold, he got it done.

He sent me an accepted agreement within the hour; a valid accepted agreement this time, and disaster was averted.

I feel as though a small percentage of the readers might be wondering why we went to all this trouble to simply clean up what could be viewed as “sloppy paperwork.”

You could call the difference in the two accepted offers “a technicality.”

But at the end of the day, there’s the right way to do things, and then there’s, well, that’s it.  There’s no other way to do things, especially in this market.

I don’t consider this an example of my “glass being half-full,” and the fact that the chances were slim that the buyers would pull out of the deal on this technicality really doesn’t matter.  Real estate is a profession, and its participants need to behave professionally.  There are way too many people cutting corners, taking chances, and deliberately skirting rules and laws.

We need to do better.

But unless or until the industry is magically transformed, I would caution every buyer and seller out there to proceed with an extra layer of caution.

There’s doing it right, and then there’s every other way.

And the only way to do things is the right way…