When real estate agents practice law…

Bad things can happen. I recently worked on a matter where seller signed an offer. The offer included an escalation clause and indicated that the the legal description was “to be attached.” However, the offer also included the tax parcel number. The listing agent attached a new addendum stating the sale price as a sum certain (calculating the price based on the terms of the escalation clause) and attaching the legal description. The seller initialed these “changes” and sent them to the buyer for the buyer’s approval. All other terms of the offer were unchanged and accepted by the seller.

Before getting a response from the buyer, the seller received another, substantially better offer from a second buyer. The listing agent informed his client that he could still revoke the first offer and accept the second because, when the offer was returned with a legal description and a sum certain sale price, it constituted a counteroffer. Thus, according to the agent, as long as the seller rescinded the “counteroffer” before it was accepted by the buyer, there would be no contract with the first buyer and the seller could enter into a contract with the second buyer.

Unfortunately, the seller took the listing agent’s counsel and proceeded to rescind the “counteroffer” and sign the second offer. The first buyer promptly hired an attorney, who promptly threatened legal action. The buyer’s attorney reasoned that, when the seller signed the offer, there was mutual acceptance of the terms of the offer, and thus a contract was created. The contract contained a tax parcel number, thus satisfying the requirement for a legal description. Moreover, to be enforceable, a contract requires either a specific price or a mechanism by which a specific price can be determined. Because the offer contained an escalation clause, it probably satisfied this legal requirement as well. This attorney’s reasoning was sound and the seller had a significant legal problem as a result of selling the same house twice.

Thus, the seller was subjected to potential liability on a breach of contract claim by the first buyer (or the second buyer, depending on which contract he breached when he sold to the other buyer). While real estate agents are allowed to engage in the limited practice of law by completing blanks in pre-printed forms, they are not allowed to provide legal analysis or counsel to their clients. In this situation, the agent did just that. If you have a question or concern about your legal rights and obligations at any point in the transaction, you rely on your agent’s input at your peril. An agent, no matter how experienced, is not an attorney and may not give you good — or even competent — advice.