When it Comes to the Law - No Consideration Means No Contract
Legal Update by Ashley Strauss-Martin, NMAR General Counsel
How many of you buyer brokers have seen this (or something like it) in the LO/SO remarks of the MLS? “Seller will consider all offers on April 15, 2021 at 5:00 pm.”
And in response, you tell your buyer – “we have to get your offer in by April 15, 2021 at 5:00 p.m.”
The buyers, thinking they have time, don’t immediately make an offer. But then, on April 13th, the listing goes into Pending. And you – the buyer’s broker – are left scrambling to explain to your buyer how this happened. You call the MLS, the Board, the NMREC – outraged! Isn’t this a violation of MLS Policy, the Code of Ethics, and/or Broker Duties? Not necessarily and THIS is how that happened.
To begin, I am assuming that the listing broker was being honest when he/she entered that information in the MLS remarks - that the sellers, at the time that statement was entered into the MLS, did express their intent (hopefully, in writing) to reserve review of offers until April 15th at 5:00 p.m. Further, I’m assuming that the seller did not, prior to moments before accepting the offer, make their change of mind known to the listing broker. If these are accurate assumptions, that listing broker [likely] did not violate MLS Policy, the Code of Ethics, and/or his/her Broker Duties in making that representation in the MLS.
The basic elements required for an agreement to be a legally enforceable contract are:
• mutual assent expressed by a valid offer,
• [communication of] acceptance and adequate con- sideration.
Legality and capacity are also of import, but we are going to assume those elements for purposes of this discussion. In the above scenario, let’s say that seller has made an offer – to not consider offers until April 15th at 5:00 pm. First, it is unlikely that the buyer communicated his/her acceptance of that offer to the seller. But more importantly, the buyer has likely not given anything in the form of consideration for the seller to reserve review of offers until a certain date/ time. Without consideration, there can be no contract for the seller to reserve review of offers until a certain date/ time and therefore, the seller can change his/her mind at any time.
Also of importance, brokers in New Mexico generally work [in the buy/sell context] as transaction brokers – NOT AGENTS - so even if the first issue was not an issue, the seller’s transaction broker cannot make any statements that bind the seller. In other words, even if consideration had been given by the buyer, (which in almost all cases, it has not) the agreement would have to be between the seller and buyer and not based on the listing broker’s representations of what the seller will or will not do. There may be an exception to this if the listing broker was working as an agent for the seller - but again, most brokers working with buyers and sellers are not working as agents.
What’s the take-way here? It incumbent on the buyer’s broker to explain to his/her buyer that even though this representation has been in the MLS by the listing broker, the seller is NOT obligated to reserve review of offers until the date specified, and that the seller could accept an offer at any time.
Remember, most of the time when consumers get upset it is because they didn’t understand how things work. This rings especially true for the purchase agreement (because consumers don’t typically read it), but it’s true in this scenario as well. If the buyer broker explains the meaning of this representation, then if the seller accepts another offer prior to that deadline, the buyer may be upset, but not as upset, because the buyer understood that’s how it may work. It also means the buyer is more likely to get his/her offer in sooner rather than later, and not miss out on the property.
In conclusion, most MLSs do not have a rule prohibiting such a remark being made in the MLS or requiring that some cautionary language be added if such a remark is made. However, that does not mean that a listing broker could not add such cautionary language to their comment
BE AWARE: unless the seller has entered into an agreement with a buyer and received consideration from that buyer to postpone review of offers until a specified date/ time, the seller may consider offers at ANY time and may accept an offer prior to the date/time expressed above.
Source: "NMAR The Voice"