Selling a property - multiple offers of same value?

Question

In the U.S., when selling a residential property, is there a rule or law regarding how to handle multiple offers of the exact same monetary amount? Is this the kind of thing that would vary state-by-state?

My family and I made an offer on a property first and the seller's real estate agent claimed that the sellers wanted to wait for more offers that they expected to be coming in shortly. Ultimately, our offer was rejected, but tax records show the property was sold for the exact value of our offer.

So my question is: is it completely and arbitrarily up to the seller to pick between multiple offers of the exact same value?

Part of the reason I'm asking is because we (my family and I) have suspicion to believe there may be a strong connection between the buyer and seller's real estate agent. And would it be considered fraud and would there be any recourse if the seller's real estate agent withheld offers from the sellers to allow a personal connection to swoop in?

Understandably, that last bit is a strong accusation and would certainly require proof, but I'm really trying to determine if what we suspect actually occurred, would it actually be considered fraudulent, or is a seller allowed to arbitrarily pick and choose an offer regardless of price/order that the offer arrived? Would it only be considered fraudulent if the seller was unaware of a higher/better offer?

Update: I realize there is some confusion based around the way I worded the original text. In the original text, I said: there may be a strong connection between the buyer and seller's real estate agent. I did not mean a strong connection between the buyer's agent and the seller's agent. I meant a connection between the actual buyer and the seller's agent.

Let me rephrase: Suppose a seller wanted to sell a property for X dollars, without realizing their property was actually worth much more than this. Seeing this potential value, I make an offer. The seller's agent also sees this large potential for profit, but cannot directly make an offer. Instead, they find a friend who is interested in investing, perhaps even passing some cash their way in hopes of profit sharing in the future, and the friend ultimately makes an offer, which is presented to the seller through the agent.

So the original question was certainly focused on whether a seller can arbitrarily pick between offers, and it seems clear the answer is yes, for essentially any reason. But the related point in this discussion which I hinted at (and which perhaps is better left a separate question) is under what conditions could a relationship with a conflict of interest in this scenario be considered fraudulent, specifically with a strong relationship between the seller's agent and a friend who could potentially become a buyer. I think DJClayworths answered well, and there does appear to be situations in which this could be a conflict of interest, such as delaying presentation of some offers to allow time for another buyer (we suspect this happened), as well as misrepresenting some buyer's offers or hiding them entirely to allow another buyer's offer to stand alone, again with the incentive that the selling agent gets a kickback when said buyer ultimately acquires the property and stands to gain tremendously from it.

Answer 1

There are no rules about how to handle equal offers. A seller is free to accept any offer they want. They don't even have to accept the highest offer if they don't want to.

Reasons why a seller might pick one offer over another despite price include date of closing, buyer not having a house to sell, and buyer having cash rather than mortgage.

However, there are rules of conduct for real estate agents. If the seller's agent does not fairly represent all offers to the seller - especially if they favour a buyer they also represent - then they are breaking the rules. In the worst case, if they communicated an offer to another buyer this may be malpractice. If you suspect this, then you should contact the organization that regulates real estate agents where you are.

EDIT: Ben asks why communicating an offer to another buyer is potential fraud. Say I offer $210k. The agent's buyer has offered $190k. The agent tells their buyer about your offer, so they up their bid to $211k. The agent's buyer gets a house they wouldn't have got (and paid no more than they needed to). You don't get that opportunity, and know nothing except your bid was rejected.

Another possible malpractice is delaying presenting an offer to the seller in order to give another buyer time to make another bid.

Answer 2

It sounds like you're new to buying a home. Congratulations. It also sound like your real estate agent has been remiss in explaining to you the various things that go into an offer and why a particular offer may be better than another.

There's no law requiring someone to accept the first offer. In a multiple offer scenario, seller's must choose the one that looks strongest and the one they like best. What makes an offer strong or best? Here are a couple items for thought:

1. Cash. An offer that's all cash is better than an equivalent offer where the buyer requires financing. Why? Because financing is not guaranteed. As some people are finding with the government shutdown, if there's an agency that needs to sign off on your mortgage and they're shut down, then you can't close and the deal falls apart. Even if all offers use financing, more cash is a stronger position. If someone is getting a loan to buy the house by putting 20% down while another person is only putting 5% down, the 20% down party is seen as the stronger financial candidate. A seller's goal when selling the house is to get paid, preferably sooner than later. Having a buyer fail to get a loan and restarting the whole process costs money.
2. Connection. Like it or not, connection to the buyer can make a difference. Not a personal connection as in the buyer is known to the seller or their agent, but a connection like the buyers are a young family (and the seller is also a young family or bought the house when they were a young family starting out). This is why some agents will suggest a buyer write a cover letter. This introduces the buyer to the seller and gives you an opportunity to forge that connection with the seller.

So, what happened in your case? Hard to know. Without more information on the details of the offers, you are just speculating, and poorly, on what could have happened. There's many other ways things could have gone down, which are completely normal and expected, than the one negative way you've happened to suggest.

Some other things to know:

A strong connection between the buyer and seller's agent doesn't mean there was fraud. Agents typically work under a broker. A particular real estate organization can have many agents, representing buyers and sellers at the same time. So, agent A who works for X real estate co may be the seller's agent and agent B, who also works for the X real estate co may be your agent. That doesn't mean you're going to get some advantage over another buyer. You can be sure, if another buyer is offering cash and your offer is contingent on financing with 3.5% down, you will lose out, regardless of the connection between yours and the sellers agent.

Sellers will delay on responding to offers to get more. Think about it. With one offer, you don't have a sense whether you've priced things too high or too low. You also don't have an opportunity to hedge against the risk of a buyer being able to secure funding for the home. Multiple offers increases the chances you'd get a higher amount for your home and get buyers with different risk profiles. If the offer deadline gives you time, why wouldn't you wait to see if you get something better?

Answer 3

Say you are right. The seller agent was tied to the buyer. Even if the accepted price were lower than your offer, you are not the party who was hurt. It was the seller. The seller potentially had a quicker and/or higher offer.

Either way, the seller agent works for the seller, and you'd have a tough time claiming damages. Unless. If you are in a protected class, a minority, LGBT, etc, and were discriminated against, you may very well have a claim against the agent/seller. If the decision were made on sale terms or familiarity with buyer, you might feel slighted, but have no grounds for any action.

Answer 4

There are a ton of factors besides price that go into deciding between offer A and offer B. For instance, I recently sold a house but wanted to stay in the house after close while looking for new place to live, so I insisted on only considering offers that included rent-back agreements. The other answers give further examples.

The tax records only show the price, they don't show all the parts of the offer, or the winding path [that] was taken to get to settlement day.

Further detail on that statement - the original offer may have even beaten yours, but negotiation doesn't stop when the offer is accepted. For instance, the buyers could have found something during inspection and negotiated a reduced sale price (to your offer level) to offset the condition of the house.

Answer 5

There is no federal law requiring the first offer be accepted, although there are laws that could be broken, or alleged to be broken, by not taking the first offer. For instance, there are laws against discrimination based on race, so if a white buyer gets the house for an equally high, but later, offer as black buyer, then a question could arise as to whether there was discrimination. In addition, there may be local laws requiring the first offer be accepted, although I am not aware of any. For renting out a unit, Seattle does require that the applications be evaluated in order of receipt:

https://www.seattletimes.com/seattle-news/politics/a-primer-on-seattles-new-first-come-first-served-renters-law/

As for the agent's conduct, if they withheld the offer from the buyer, that could be considered fraud (there is an implicit, if not explicit, promise in becoming someone's agent to present all offers), but it would be the seller, not you, that would be the victim of the fraud. The agent has no fiduciary duty towards you, and although there are some legal theories, such as tortious interference, under which you might advance a legal argument, it would be difficult to win such a case.

Answer 6

As others have pointed out two offers can be for the same amount of money and not be identical becasue of the other important parts of the offer such as contingencies, and financing.

My family and I made an offer on a property first and the seller's real estate agent claimed that the sellers wanted to wait for more offers that they expected to be coming in shortly. Ultimately, our offer was rejected, but tax records show the property was sold for the exact value of our offer.

There is another issue related to price. If you are bidding an amount under the listing price, they have zero obligation to accept your offer. They may be given the advice to wait for other offers. If I list my house for $200K and you offer me $190K on the first day, I will hope I get a better offer tomorrow. Of course I might end up selling six months later for $190K becasue we misread the market.

Now If a buyer offers the full asking price (or even higher) with zero contingencies, then the sellers agent will be advising them to accept the offer. They seller will be encouraged to accept becasue their agent has met they contractual requirement and will be expecting their commission.

But if there are offers under the listing price, then the seller can decide to wait for a better offer.

The tax records only show the price, they don't show all the parts of the offer, or the winding path was taken to get to settlement day.

Answer 7

One reason is the lack of a split commission. If there is both a seller's agent listing the property, and an agent who brought the buyer into the sale, they typically split the commission. If it's a 6% commission, they both get 3%. If, however, the buyer of the property contacts the listing agent directly, only one agent is involved, so they get the full 6%. In this case, the listing agent can afford to reduce their commission charged to the seller, to say 4% or 4.5%, and still make more money then if the house was co-broked. So the seller gets the full amount of money (or even more!) and the buyer pays the same price, and the listing agent makes more money! (happened to me!)