Must a Listing Broker present all offers received prior to the close of escrow?

  For a recorded version of this message from Brian Cuttone, Principal Broker & General Counsel of Guarantee Real Estate, click HERE.


I.             QUESTION:        Must a Listing Broker present all offers received prior to the close of escrow?

 


II.            ANSWER:            No. 

 

III.          EXPLANATION:               There is a common misconception amongst Realtors® that a Listing Broker is obligated or required to present all offers he or she receives, prior to the close of escrow, to his or her seller client.  A seller can expressly direct his Listing Broker to: (1) only present offers that meet certain criteria or (2) after an offer is accepted, to stop presenting offers.  Such direction, does not need to be in writing under California Law, the Regulations of the Commissioner of the DRE or the Rules and Regulations of the Fresno Association of Realtors®.  Simply put, neither a buyer nor its broker can require a seller to review or consider an offer that does not meet his or her expressly stated pre-requisites, or to consider an offer after he or she has accepted that of another, or when merely in negotiations with another.  Further, neither the buyer nor its broker can compel the Listing Broker to present or transmit an offer against the seller's prior direction or require the Listing Broker to prove his seller has expressly directed him so. Some may say that this is not fair to the buyer.  However, ask yourself in what other business can you compel a seller to acquiesce to your demand to consider your offer or his employee, for that matter, to prove he has been directed to act in accordance with his boss?

IV.          AUTHORITY:  The authority regarding the presentment of offers can be found at §2785 of the Regulations of  the Real Estate Commissioner.  See (Chapter 6, Title 10, California Administrative Code)  Article 11Code of Ethics and Professional Conduct.

Section 2785, entitled Professional Conduct, states in relevant part:  "Licensees when performing acts . . . shall not engage in conduct which would subject the licensee to adverse action, penalty or discipline . . . including, but not limited to, the following acts and omissions:

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(14)  Willfully failing, when acting as a listing agent, to present or be represented to the owner of the property any written offer to purchase, received prior to the closing [of] a sale, unless expressly instructed by the owner not to present such an offer, or the offer is patently frivolous."

Section 9 of the Fresno Multiple Listing Service Rules and Regulations, regarding the presentation of offers, is in accord with the Regulations of the Commissioner.  Section 9.4, entitled Presentation of Offers, states in relevant part: "The listing broker must make arrangements to present the offer as soon as possible, or give the cooperating broker a satisfactory reason for not doing so."  This section contemplates that the listing broker may not be obligated to present the buyer's offer under certain circumstances, as set forth in section 9.5.  Section 9.5 states  in relevant part:  "The listing broker shall submit to the seller all offers until closing unless precluded by law, governmental rule or expressly instructed by the seller otherwise."

V.            CONCLUSION:                  In sum, the listing broker owes no duty to the buyer or the buyer's broker to submit any offer presented to the listing broker.  As stated by the Commissioner's regulations, the seller of the property decides whether an offer shall be presented and what requirements an offer must satisfy before it is presented to the seller.  Further, if an offer is patently frivolous, the listing broker is not required to present it. 

VI.          RECOMMENDATION:  If your client directs you to only send offers meeting certain pre-requisites or, once they have accepted an offer, to not submit any more, then you must comply with their directives.  While not required by law, those directives should be in writing from the seller and a copy on file with the listing broker or agent who is responsible for that seller. This, of course, is logical.  Its the seller's property, its the seller's carrying costs that are involved and its the seller paying the commissions. 

 See Mitchell v. Gould (1928) 90 Cal.App. 647, 652 (It is a breach of the DRE Code of Ethics for a listing broker to fail to present to the owner any offer to purchase that he receives prior to the closing of a sale, unless (1) expressly instructed to the contrary by the owner, or (2) the offer is frivolous. Cal. Code Regs., tit. 10, §2785, subd. (a)(14)."