Bully Offer on a Scheduled Offer Night
A seller lists a detached house at $749,000 and instructs the listing brokerage in writing: “Present all offers at 7 p.m. Tuesday; do not accept any pre-emptive offer.” Three buyer representatives have registered offers for Tuesday. On Monday at 5 p.m., a fourth buyer’s representative submits a firm offer of $785,000 with a $30,000 deposit, irrevocable until 8 p.m. Monday. The seller calls the listing salesperson and says, “Accept it now-I don’t want to wait.” The listing salesperson has not yet told the three registered buyers that a pre-emptive offer exists. One of those buyers is a client of the same brokerage. The listing salesperson wonders whether the seller can change the instruction, what must be disclosed to the other buyers, and when the deposit must be deposited into trust.
1. Can the seller accept the pre-emptive offer after instructing the brokerage not to accept one? What should the listing salesperson do?
Read the worked answer
The seller’s written instruction is a direction to the brokerage, not an irrevocable contract with the buyers. The seller can change it, but the listing salesperson must confirm the new instruction in writing and explain the consequences: accepting a pre-emptive offer ends the scheduled competition and may leave money on the table if the Tuesday buyers would have bid higher. The salesperson must not accept on the seller’s behalf without authority; if the seller says accept, prepare a written acceptance before the 8 p.m. irrevocability expires and deliver it promptly. The salesperson should also remind the seller that the three registered buyers and the same-brokerage buyer have been led to expect a Tuesday presentation; fairness and reputational risk matter, even if the seller is legally free to change course. If the seller wants to hold the bully offer without accepting, the salesperson must follow lawful instructions and avoid using the offer to mislead other buyers.
2. What must the listing salesperson disclose to the three registered buyers and the same-brokerage buyer?
Read the worked answer
The listing salesperson must not disclose the amount, deposit, or terms of the bully offer to the three registered buyers or the same-brokerage buyer unless the seller authorizes that disclosure. With the seller’s written authorization, the listing representative may disclose the existence of a competing offer, but even then should not reveal its contents. Once the seller accepts the bully offer, the listing representative should promptly notify the registered buyer representatives that the property is sold firm or conditional, as instructed, and stop marketing/showings. If the seller rejects the bully offer and proceeds Tuesday, the listing representative should tell the registered buyers only what the seller authorizes-typically that a pre-emptive offer was received and not accepted. The same-brokerage buyer’s representative must keep the buyer’s information separate and cannot use the seller’s side’s knowledge of the bully offer to advantage the buyer client without authorization.
3. What happens to the $30,000 deposit, and what same-brokerage issues must be managed?
Read the worked answer
The $30,000 deposit must be delivered to the listing brokerage and deposited into its trust account promptly under the brokerage’s trust procedures once the offer is accepted. The deposit is trust money; it cannot be paid to the seller, used as a negotiating chip, or released without closing, a written mutual release, or a court order. The listing salesperson should issue a receipt and record the deposit in the trade file. Because one buyer is a client of the same brokerage, the brokerage must have the same-brokerage consent or designated-representation structure in place; the listing side cannot share the bully offer’s terms with the buyer’s side, and the buyer’s representative cannot share the buyer’s instructions with the listing side. If the seller accepts the bully offer, the listing representative should confirm in writing that the Tuesday presentations are cancelled and ensure all buyer representatives are notified promptly and accurately.