In a tight market, the management of offers is a sensitive subject for customers, agencies and employees.
It was a client who gave me the idea for this article and I know that he will recognize himself as a faithful reader. Several collaborators of the same agency each had an offer on a property and each considered that his offer had priority. So, what bonus offer and how to do it?
1. The first offer at the price
Before the counter-signature of an offer by the seller, it is very common to hear that it is the first offer at the price that takes precedence. If for a time this practice was based on the case law of the Court of Cassation (A), the evolution of texts and case law now gives it a limited scope (B).
For a long time, we wondered about the legal value of a real estate ad. Can advertising for the sale of real estate be considered as an offer to sell, the mere acceptance of which would be worth formation of the sale? In the past, the Court of Cassation answered in the affirmative by judging with regard to advertisements for real estate, that the offer of sale made to the public can lead to the formation of the contract by the mere occurrence of an acceptance, at the same title as an offer made to a specific person (Cass. 3rd civ., Nov. 28, 1968, no. 67-10.935; Cass. 3rd civ., July 1, 1998, no. 96-20.605, no. 1183) . However, this pollicitation case law is limited in scope.
B. A limited scope
Nowadays, the limitation of the effects of this case law results both from the evolution of the texts and from the case law itself.
1. The evolution of texts
In 2016, the Civil Code codified the principle of solicitation by creating article 1114: “The offer, made to a specific or undetermined person, includes the essential elements of the contract envisaged and expresses the will of its author to to be bound in the event of acceptance. Otherwise, there is only an invitation to enter into negotiations. It is therefore no longer enough to respond positively to an ad to form a contract. The offer must contain the “essential terms” of the sale and the advertiser must express its willingness to be bound in the event of acceptance. Sales training is no longer automatic. Added to this is a jurisprudential development which distinguishes two cases: advertising made by a real estate agent and that made by the owner.
2. The evolution of case law
- Advertising by a real estate agent.
When the property is advertised by a real estate agent holding an intermediary mandate (i.e. a mandate authorizing him to seek buyers and to negotiate, but not authorizing him to accept an offer, nor to sign a compromise), a purchase offer at the price of the advertisement does not bind the parties (Cass. 3rd civ., June 17, 2009, n° 08-13.833, n° 796 FS -P + B).
Thus, the mediation mandate forms a “shield” that prevents the advertisement from being considered as an offer, the acceptance of which by the first purchaser would constitute a sale.
- Advertising by the owner.
When the advertisement is made by the seller, the “shield” of the real estate agent’s intermediary mandate does not exist. However, can we automatically consider that there is a sale as soon as a buyer makes an offer at the advertised price? The Paris Court of Appeal ruled in two judgments in 2014 that there was no sale in view of the complexity of a real estate sale and that the advertisement was only an invitation to enter into negotiations. It would be appropriate for the Supreme Court to confirm this position.
Thus, the first offer sent to a real estate agency holding an intermediary mandate does not bind the seller and the buyer if it has not been accepted by the owner. Therefore, how should the agency proceed if it receives concurrent offers for the same property?
Management of concurrent offers
A. The obligations of the agency
The agency must fulfill its mission as long as it is entrusted with it and be accountable for it. Thus, if the seller has not made a commitment with a buyer, the agency must send him the offers received. This results both from the Civil Code (articles 1191 and 1993), from the so-called Hoguet regulations (article 77 Decree of 20/07/1972), but also from the Code of ethics of real estate agents (article 8-3° to 8- 5°) which provides that professionals must: “3° communicate to their principals and to the other parties to the transactions for which they have been mandated all the information that is useful to them so that they can make their decisions in a free and informed manner ; 4° Report regularly and as soon as possible to their principals on the performance of their mission and warn them of any difficulties encountered; 5° Transmit to their principal as soon as possible any proposal responding to the mandate entrusted; »
The seller, for his part, under the visa of article 1102 of the Civil Code, is free to choose his buyer, subject to not derogating from a rule of public order (eg: discrimination).
B. The process
In any case, there will be frustration to manage among the buyers, collaborators and/or the agency having presented the unsuccessful offers. It is better to have a process that respects regulations and is transparent with regard to customers. I propose one in six steps:
- Receive all concurrent offers.
- Inform buyers of the plurality of offers and the legal framework.
- Request proof of funding.
- Forward all offers to the seller.
- Advise the seller, particularly in consideration of the solvency of the buyers.
- Keep track of the transmission of offers.
Failing this, the liability of the real estate agent may be engaged by the buyer or the seller, in particular for loss of chance.
The Paris Court of Appeal has just made a very recent application of the proposed solution (CA Paul February 1, 2022, No. 20/00884) ruling that “in view of two offers made on the same day, May 7, 2018 , it must be considered that they are concomitant. It was not up to the agency, which did not have a representation mandate, to give an answer to these proposals itself” and that the seller did not commit any fault “by choosing the buyer whose the offer was unequivocally devoid of the condition precedent of obtaining a loan”.
Finally, last important point: if the agency receives an offer at a price higher than the price of the mandate, it must also forward it to the seller.