Note: This article is for information only and is not intended as legal advice. If you need legal advice, please contact a qualified attorney.

Fact Scenario:

Buyer Bob’s REALTOR® submits a signed Purchase Agreement to Seller Sally’s REALTOR®. To save time and effort, Sally verbally instructs her REALTOR® to counter Bob’s offer via email. Bob’s REALTOR® responds to Sally’s email with an email containing new counteroffer terms. Sally’s REALTOR® responds via email that Sally accepts.

Bob’s REALTOR® revises the original Purchase Agreement to reflect the negotiation and Bob signs. Bob’s REALTOR® sends the Purchase Agreement to Sally’s REALTOR®. Before Sally receives the updated contract, Sally’s REALTOR® receives an offer from another REALTOR® working with Buyer Betty. Sally’s REALTOR® is legally obligated to share Betty’s offer. Sally likes Betty’s offer and immediately accepts it by signing Betty’s Purchase Agreement.

Sally’s REALTOR® sends the signed purchase agreement to Betty’s REALTOR®, and texts Bob’s REALTOR® that Sally has accepted another offer. Bob is distraught.

Written Contracts

Alabama law includes a version of the Statute of Frauds, which is a legal doctrine that requires certain types of contracts to be written. Alabama’s Statute of Frauds requires that most contracts for the sale of real property be written to be binding. Ala. Code § 8-9-2(5). The only exception to this is if the buyer 1) pays at least a portion of the purchase price and 2) receives possession of the property from the seller. Id.

The issue in this scenario is that Sally’s REALTOR® began negotiating via email, and Bob’s REALTOR® followed suit. Although REALTORS® may certainly communicate about an offer or aspect of a negotiation, the agreement is ultimately between the consumers. The emails exchanged between the REALTORS® were not sufficient to create a contract to sell real property. If Sally’s REALTOR® would’ve responded to Bob’s original offer by making changes on the Purchase Agreement or using a Counteroffer Form instead, the two would’ve had a binding agreement. Since they didn’t have a binding agreement, Sally was free to accept Betty’s offer when she received it.

• TIP: If you talk to another licensee about an ongoing negotiation, immediately memorialize it in writing on an official form. We know that can be inconvenient, but making that effort can make all the difference in ensuring your client is protected.
• TIP: E-signatures on document management platforms satisfy the Statute of Frauds. Ala. Code §§ 8-1A-2(9), 8-1A-7. These platforms are convenient and helpful. Even so, it’s critical for you to present the contract to the consumer and help them understand it. Your job doesn’t end until after you leave the closing table!

Agent Authorization

Alabama law also allows agents to sign a Purchase Agreement on behalf of a client if they are given written authorization to do so. Hight v Byars, 569 So. 2d 387 (Ala. 1990). If Sally had given this authority to her REALTOR® in writing, her REALTOR® would have been able to accept Bob’s offer on Sally’s behalf. Depending on the timing, this might have also helped save the deal for Bob.

• TIP: Even though signing on a client’s behalf is legally an option, AAR doesn’t recommend it. This opens the door for a client to argue that you didn’t disclose an aspect of the contract to them. Unless you have a written record of what you explained, it can be difficult to prove your position. Therefore, you have greater protection from liability if you present the contract to the client and allow them to read and respond to it.