Offers — Chapter 3
Statute of Frauds
The Business and Commerce Code §26.01 requires that a promise or agreement be in writing.
(a) A promise or agreement described in Subsection (b) of this section is not enforceable unless the
promise or agreement, or a memorandum of it is in writing; and signed by the person to be charged
with the promise or agreement or by someone lawfully authorized to sign for him.
(b) Subsection (a) of this section applies to:
» a promise by an executor or administrator to answer out of his own estate for any debt or damage due
from his testator to intestate;
» a promise by one person to answer for the debt, default, or miscarriage of another person;
» an agreement made on consideration of marriage or on consideration of non-marital conjugal
cohabitation;
» a contract for the sale of real estate;
» a lease of real estate for a term longer than one year;
» an agreement which is not to be performed within one year from the date of making the agreement;
» a promise or agreement to pay a commission for the sale or purchase of:
• an oil or gas mining lease;
• an oil or gas royalty;
• minerals; or
• a mineral interest
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Statute of Frauds Applies to the Following:
» a promise or agreement to pay a commission for the sale or purchase of:
• an
agreement, promise, contract, or warranty of cure relating to medical care or results thereof made
by a physician or health care provider as defined in Medical Liability and Insurance Improvement Act of
Texas §1.03.
This section shall not apply to pharmacists.
Negotiations for the sale of real estate may be conducted orally or in writing. However, an agreement to
sell real estate is not enforceable unless it is in writing and signed by the party against whom it is to be
enforced.
Additionally, mutuality must exist, which means the parties have unequivocally agreed to all material
terms.
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Statute of Frauds
Timely Presentation of Offers
A licensee has a duty to communicate or submit offers to his or her client [TRELA §1101.557(b)(2); 22
TAC §535.156(b)]. The communication or submission of an offer should be done promptly because the
licensee’s duty is to keep his principal informed at all times of material information. There is no specific
amount of time within which the licensee must present or submit an offer. Nonetheless, in most cases,
the submission of an offer (or, at least, a communication to the principal that an offer has been
received) can easily be done within a short period of time. A licensee who fails to submit or
communicate to his principal that an offer has been received may be disciplined [TRELA §1101.652
(b)(33) in violation of §1101.557(b)(3)].
Occasionally, a buyer’s agent might ask to be present at the time the listing agent submits or
communicates the offer to the seller. There is no provision in the Real Estate License Act or the
Rules of the Commission that require the listing agent to permit the buyer’s agent to be present or to
accommodate the request. However, Multiple Listing Services have rules that provide that the listing
agent should accommodate the buyer’s agent request. In such an event, the listing agent might wish to
ask the seller if the seller is willing to permit the buyer’s agent to be present at the time the listing agent
submits or presents the offer. The listing agent might also want to advise the seller to listen to the
buyer’s agent but not negotiate the offer until the listing agent and the seller have had an opportunity to
review the offer and discuss matters privately.
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Statute of Frauds
Timely Presentation of Offers
In a situation in which a buyer’s agent questions whether the listing agent has submitted an offer to the
seller, the buyer’s agent must be careful not to base such an allegation on mere suspicion and should
have a reasonable basis for such an allegation. While it is permissible for a buyer’s agent to ask for
some sort of verification that the offer has been presented (for example, a written statement signed by
the seller that the offer has been presented), neither the listing agent nor seller is obliged to provide
such a verification.
Nonetheless, the listing agent is statutorily and ethically obligated to present all offers timely. Likewise,
the MLS rules may also provide that a listing agent may ask to be present at the time a buyer’s agent
submits or communicates an offer or counteroffer to a buyer. In either case, the client has the right to
decline to have the other agent present when the offer is presented.
Proper Treatment of Option Money
When a buyer purchases an unrestricted right to terminate pursuant to Paragraph 23 (Termination
Option) in any of the 6 TREC promulgated contracts, the buyer has 2 days after the execution date of
the contract to tender the agreed upon option fee to the seller. The buyer’s agent/broker should deliver
the option fee to the listing agent/broker or seller within the 2-day period. Delivery can be by mail,
courier, certified mail, or by personally delivering the option fee to the listing office. The option fee
should not be delivered to any third party involved in the transaction, such as the title company or the
lender.
The buyer will not have a termination option if the option fee is delivered after the 2-day period
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Statute of Frauds
Timely Presentation of Offers
Presentation of Multiple Offers
If a broker receives more than one offer, all offers must be presented to the seller unless instructed
otherwise by the seller. No offer has a priority of presentation over another. The broker should submit
all offers promptly. For example, if a licensee receives a written offer at 9 a.m. and presents it to the
seller and then receives a second offer at 3 p.m. (before the seller has accepted the first offer), the
licensee has the duty to submit the later offer to the seller for his or her consideration.
In the same example, if the agent representing the second buyer is aware that multiple offers have
been received, the listing agent should notify the agent representing the first buyer that multiple offers
have been received. The same would be true regardless of the number of offers. The listing agent
should keep the terms and conditions confidential so as not to give one buyer a significant negotiating
advantage over another.
A broker is obligated to place his or her client’s interest first and is also obligated to treat other parties
to the transaction honestly and fairly [22 TAC §531.1; §535.156 9b)].
A contract for the sale of real estate must be in writing and signed by the parties to be charged with
performance in order to be enforceable (Business and Commercial Code §26.01). The agents,
therefore, should take care to make no representations as to acceptance of an offer until all parties
have signed and communicated acceptance.
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Statute of Frauds
Timely Presentation
Seller’s Acceptance
Acceptance of an offer (or counter-offer) is the point at which a contract becomes binding (also known
as the effective date). Acceptance occurs at the point when the person who receives the offer (or last
counter-offer) unequivocally accepts the provisions of the offer and communicates his or her
acceptance of it. Communication of acceptance may be by any reasonable means.
It is also important to keep in mind that a court will not enforce a contract for the sale of real estate
unless it is in writing and signed by the party against whom enforcement is sought. Therefore, the point
at which an enforceable contract is created occurs when » the document is in writing (usually satisfied
through the negotiation using standard contract forms),
» the document is signed by the parties (with initials indicating acceptance of any changed terms
through counter-offers),
» the acceptance is unequivocal as to the terms of the offer, and
» communication of the unequivocal acceptance is made to the party who made the last offer or
counter-offer.
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Effective Date
TREC-promulgated contract forms instruct the broker to fill in the date of final acceptance as the
effective date. As discussed above, final acceptance occurs on the date that the person receiving the
offer communicates acceptance to the person making the offer. Acceptance must be unequivocal. See
Revocation of Offers/Counteroffers
A buyer or seller may revoke any offer or counteroffer prior to acceptance by the other party.
Minimum Services
TREC regulations have addressed the minimum services a broker is obligated to provide in a number
of ways. Under 22 TAC §535.156, the licensee:
» has an obligation to submit all offers,
» must convey all known information that will affect the principal’s decision to make, accept or reject
offers,
» must deal fairly and honestly with all parties but owes a duty of fidelity to his or her principal,
» has an affirmative duty to keep the principal informed, at all times, of significant information applicable
to the transaction, and
» has a duty to convey accurate information.
Under 22 TAC §535.2, brokers are obligated to negotiate the best possible transaction for their clients.
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Minimum Services cont.
In 2005, the legislature amended TRELA §1101.557 to clarify a broker’s duty to negotiate. The
amendment states that a broker who exclusively represents a client may not instruct another broker to
violate the Real Estate License Act by telling the other broker to negotiate directly with the broker’s
client. This is consistent with TRELA §1101.652(b)(22), which provides that a broker may not negotiate
a transaction directly with a principal in the transaction if the broker knows that the principal is subject to
an exclusive agency relationship with another broker. The amendment to TRELA §1101.557 provides
that the mere delivery of an offer by one broker to a client of another broker does not violate
§1101.652(b)(22) if the delivery is made with the consent of the client’s broker and the client’s broker
receives a copy of the offer. TRELA §1101.557 also provides that the broker who exclusively
represents a client must, at a minimum, » answer the client’s questions about the offer or issues related
to the offer, if any,
» keep the client informed of material information, and
» present offers to or from the parties.
For example, a listing broker may NOT instruct a buyer’s broker to negotiate directly with the seller.
Instead, he or she may request that the buyer’s broker deliver an offer to the seller. If the buyer’s broker
delivers the offer to the seller at the listing broker’s request, the buyer’s broker must send a copy of the
offer to the listing broker and may not engage with the seller in any other activity that constitutes a
negotiation.
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Minimum Services cont.
All that the buyer’s broker may do is perform the administrative task of delivering the offer to the seller.
If the listing broker receives an offer, the listing broker must inform the seller than an offer has been
received. The listing broker may not withhold any material information from the client. A buyer’s broker
might refuse to deliver the offer to the seller and, instead, might send the offer to the listing broker. The
listing broker would then be required under law to inform the seller that the offer has been submitted.
Whether, at the listing broker’s request, the buyer’s broker delivers the offer to the seller or delivers it to
the listing broker, the seller should receive the offer promptly and the listing broker should be aware
that an offer has been made.
If the seller wishes to make a counter-offer to the buyer’s broker, the listing broker is obligated to
communicate the offer to the buyer’s broker. A sophisticated seller who needs little or no assistance
from the listing agent might prepare a counter-offer and either
(a) send it to the listing broker who might do nothing more than deliver it to the buyer’s broker or
(b) deliver it to the buyer’s broker and send a copy of the listing broker. In either case, the listing broker
is aware that negotiations are taking place and stands ready to assist the seller, if necessary.
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Minimum Services cont.
If the seller wants to engage in oral negotiations with the buyer or buyer’s broker, the buyer’s broker
should not engage in such discussions unless the listing broker is present (either in person, by phone
or otherwise).
Any subsequent offer back from the buyer to the seller should be communicated under this same
procedure. TRELA §1101.557 also addresses a few technical questions related to property managers,
builders and governmental sealed bid procedures. If a property manager has the authority to bind the
owner to a lease, the property manager does not need to communicate offers to the owner if the
property manager has the authority to enter into the lease and make such decisions for the owner.
If the seller is a builder, the buyer’s broker may ask the builder’s employee or sales representative
about specific forms or contractual terms the builder might require. These inquiries do not violate the
Real Estate License Act. The delivery of any offer to the builder should follow the same procedures as
outlined previously. If the buyer’s broker is assisting the buyer in bidding on a HUD- or VA foreclosed
property and the government requires that such bids be submitted through a sealed process, the
buyer’s broker does not have to deliver a copy of the offer to the listing broker.
MCEEthics
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