ask george & chuck
June 25, 2007

Multiple offers, breaking contracts with agents
Answers to real estate questions as appearing
in the Houston Chronicle

Dear George: Is the following situation legal? A real estate agent lists a home for sale and presents an offer to the seller from one of her clients. The seller rejects the offer. A buyer's agent affiliated with a different real estate firm makes an offer on behalf of his client. The listing agent tells her client, the first buyer, the amount of the new offer. The first buyer increases his offer, which is accepted by the seller. The listing agent gets a full commission as the only agent involved in the transaction.

Answer: There doesn't seem to be anything illegal about the actions of the listing agent. However, you raise an interesting question as to an agent's fiduciary obligations to represent the interests of his client and his ongoing duty to treat all parties to the transaction fairly. The primary job of a listing agent is to obtain the best price and terms under current market conditions for the seller of the listed property. In that regard, the listing agent might have done nothing wrong by telling the first buyer the amount of the second offer; she may have been obeying a lawful instruction from her client, the seller. We don't know what the terms and conditions of offer were. Therefore, the original offer may have been a better offer except for the price. The seller could have told the listing agent to see if the original buyer would increase the amount offered. That in itself is a reasonable and lawful request.

The manner in which the listing agent asked the first buyer, however, is where an ethics violation might possibly exist. If the second buyer is a prospective party to the transaction and the listing agent conveyed information to the first buyer but not the second buyer, you might be able to make a case for damages based upon the listing agent's failure to treat all parties to the transaction fairly. That's hard to prove, though. Many listing agents dealing with a seller who has received multiple offers from different buyers will submit a form to each buyer inviting them to submit another offer.

Dear George: I paid my REALTOR® a non-refundable fee of $295 when I signed an agreement with her. She said the fee was necessary so she wouldn't waste her time representing me. Since then, she always wants me to accept whatever offer comes across the table and asks me to do things not in my best interest. Is there any way I can break this contract?

Answer: The response your agent gave you was unfortunate; however, it makes sense for brokerage firms to charge this type of fee. And, if a contract that included such a fee was signed by both parties, there is nothing illegal about the arrangement. If you truly believe the agent does not represent your best interest, hire an attorney to represent you, because your situation will likely turn into a contract dispute. You could also send her a written communication terminating your representation agreement; request a written release from her. The rules of the Texas Real Estate Commission state: "Agency may be terminated at any time by either party; however, an early termination without cause may expose the terminating party to liability under the agency agreement."