Blog by Andrew Peck

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"Is a verbal agreement binded?"

"Is a verbal agreement binded?"

"My buyer called me at the last minute before completion date and asked for an extension on the completion date. He explained that while he had originally removed his subject to financing, the situation changed and he needed an extra week to arrange financing. I am also working for the seller, so I called him and he agreed verbally to the extension. I drafted an addendum and the buyer signed but now the seller is refusing to sign the extension. The buyer is mad and threatening to sue me and the seller."

This is clearly an area where you have to advise both parties to go see their lawyers as you can’t offer legal advice, and you should put that advice in writing to both parties. 

In general, as the agent for the seller, your words to the buyer that the seller agreed to grant the extension can be binding on the seller even though they haven’t signed it – the written agreement is the form of evidence. Agency law enables the agent to bind the principle to an agreement within a transaction. If you didn’t have the true agreement of the seller, you should not make any representation to the buyer.  Now that the buyer has been told the extension is granted (but not signed) it is likely the buyer can try to enforce this in court. At a minimum, he will be able to file a Certificate of Pending Litigation (CPL) on the title which will prevent the seller from conveying the property to others.  This gets very messy and costly for both parties. A bit of good salesmanship might get this deal back on track especially when they realize what the legal fight will cost.   

In this case as you are a dual agent, you must be careful to not favour one party over the other (remain impartial), but remain true to the relationship and role as noted in the Working with a Realtor brochure under Limited Dual Agency. The limits are to disclose PRICE, MOTIVATION, or PERSONAL INFORMATION. The seller’s reaction to signing the document is not price, motivation, or personal information so you are free to discuss this (but not the buyer’s personal information unless they have authorized you to reveal this). There is an overwhelming urge to side with one party or the other in this type of situation, but when you are acting as a limited dual agent, you must remain impartial.

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