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Bank Not Obligated To Sell Foreclosure At List Price

Ginny…I offered full price — $168,000 — for a home in foreclosure. The bank came back with a refusal and a new sales price of $240,000. That is $72,000 over the asking price. Is this legal? — Maryedith B., Charleston, SC

Maryedith…Yours is an interesting question. I need more facts, such as (1) how and where was the price advertised at $168,000? and (2) did you have any contingencies in the sales contract that you presented to the bank?

In order to have a legal and binding real estate contract, three things are needed: (1) offer — typically, the buyer makes an offer to the seller, which can be accepted, rejected or countered; (2) acceptance — the seller accepts the offer; and (3) valuable consideration — usually, this means money, such as the earnest money deposit that accompanies the sales contract.

However, consideration does not always require money. For example, if one party refrained from looking for any other house or put their own house on the market based on the fact they believed they had a contract to buy another house, that can also be considered “consideration.”

In a real estate transaction, the seller will list the property with a broker for an agreed upon price. If a buyer presents an offer at that price — with no contingencies — the broker may be entitled to a commission under the terms and conditions of the listing agreement.

But the seller is not obligated to sell at that price, even if that’s the listed price. The listing agreement is a contract between the seller and the broker but is not considered an offer that can be accepted by a buyer.

The best example: If a large department store advertises a TV set and the price accidentally is shown at $1, the courts have consistently held that this is request for an offer but is not an offer that can be accepted by the public, and therefore not binding on the department store.

By analogy, the bank did not make you an offer for $168,000 but simply requested that you make an offer. Since the bank did not accept your offer, there is no contract and the bank does not have to sell to you at that price.

I think it is reprehensible conduct on the part of the bank, but, in my opinion, not necessarily illegal.