Is a Home Seller Required to Accept a Full-Price Offer?
Is a Home Seller Required to Accept a Full-Price Offer? This is a sticky situation that some home sellers find themselves in when they get a full-price offer, and subsequently feel regret that maybe they've actually under-priced their home. In this situation, it pays to work with an experienced real estate agent to make sure that you don't miss out on a potential buyer and, in the process of trying to negotiate, also create a potential legal issue for yourself.
An Example Scenario
Say that a couple had their home listed for $325,000. After being listed for three months, the sellers felt that their local real estate market had heated up and was favoring sellers. In fact, it seemed that one could put a doghouse on the market and sell it for 10 times its worth. When the couple first put their home up for sale at $325,000, they didn't get any offers at all for almost three months.
Finally, they received an offer at $325,000, and their agent was pushing for them to accept that offer. However, once they got the offer, they wanted to counter offer at $340,000, but their agent was reluctant, which was making the couple furious. They thought that agents were supposed to get the highest price possible for them.
A Question of Ethics
Is a home seller required to accept a full-price offer? The main reason a home seller would not accept a full-price offer is if the seller has received other offers at higher prices. Then, a seller might want to instead accept one of those offers.
It is not considered ethical, and it might even be against the law, to ask a buyer to pay more than list price when the buyer has made a full-price offer. If you receive multiple offers for more than your listing price, you may have listed your home too low. In the above situation, however, the home sat on the market for three months, so was likely not underpriced.
In seller's markets, it's normal to receive multiple offers if you are selling a highly desirable home. Sometimes, sellers confuse a multiple-offer scenario and the rights that accompany multiple offers, with a scenario in which only one offer is received. When a seller has received only one offer, the rules are much different.
To explain, say, you are walking by a bakery and the sign in the window advertises Giant Cinnamon Rolls for 99 cents each. You're hungry. You enter and hand the cashier a buck, asking for a cinnamon roll. The cashier shakes her head and says, "My boss has decided to sell these rolls for $3.50 each. That will be $3.50 please."
If this happened, you might feel like you are a victim of a bait-and-switch. This would be false advertising, and by now you'd probably feel like walking across the street to a competing bakery to buy their giant cinnamon rolls instead for $1.50 each. What you thought was a bargain was a scam.
When Does a Broker Earn the Commission?
There's a legal aspect to this that is very important because you could be on the hook for a commission even if you reject the offer. In some states, when a seller receives a full-price offer from a qualified buyer, it means the real estate brokerage has earned the commission. If you reject the full-price offer, you might still owe the brokerage a commission because the brokerage has performed.
This used to be the law in California for many, years but it changed in 2013. Check the laws in your state to see if this applies. In California at least, escrow is required to close before the brokerage is entitled to the commission.
Check the listing agreement as well, because it may contain verbiage that says the seller cannot reject a full-price offer. Moreover, the multiple listing service (MLS) where the listing is published might have its own rules for offers as well.
MetroList MLS, for example, has rules that say if a seller receives a full-price offer and rejects that offer, the agent must either raise the sales price in the MLS or note in the confidential agent remarks that the seller rejected a full-price offer.
A note like that in MLS would probably stop other agents from recommending the home to their buyer. Further, it can be considered misleading advertising if a seller advertises that a home is available to buy at $325,000 but really wants $340,000 and doesn't disclose it. If you really want $340,000 for your home, you need to advertise your home at $340,000.
When You Get Multiple Offers
This logic and those rules do not apply if you're selling in a competitive market and receive multiple offers. In the above situation, however, the home had been on the market for 3 months without receiving any offers. This says there is either something wrong with the house or market, it's in the wrong location, or bad condition or the price is too high. Whatever the problem is, it seemed that buyers did not want to buy the home, much less pay $325,000 or else the couple would have received an offer already, even a lowball offer.
To raise the price on ONE buyer who is willing and able to buy your home is against your best interest. This may not be what sellers want to hear, but the facts speak for themselves. Most sellers in the couple's position would be grateful and elated to have received a full-price offer, especially after such a long time on the market.