A buyer in California includes an escalation clause in her offer on a home in Walnut Creek, stating she will pay $5,000 more than any competing offer up to a maximum of $800,000. The listing agent receives another offer for $760,000. Under California law, what obligation does the listing agent have regarding the escalation clause?
Correct Answer
C) The listing agent must present both offers to the seller and explain how the escalation clause works
An escalation clause is just a term of the buyer's offer. The listing agent's fiduciary duty of utmost care, integrity, honesty, and loyalty, described in the statutory agency disclosure at Civil Code section 2079.16, requires the agent to deliver every written offer to the seller and to explain what each one means, which here includes showing the seller how the escalation would operate against the $760,000 offer. The agent has no authority to reprice an offer, to reject one, or to reveal the terms of a competing offer without the seller's direction. Presenting both offers with an explanation leaves the decision where it belongs.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
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