In a real estate market tense by lack of offers, it sometimes happens that buyers who covet a particular good outbid in order to be able to acquire it. Is this practice of overbidding legal, authorized, or prohibited in real estate?

Overbidding is not prohibited when the property is sold by a real estate agent.

The real estate agent acts under an intermediary mandate, which does not allow him to hire his principal. When he collects an offer at a price, it is up to him to transmit it immediately to the seller to obtain his agreement on the proposed sale. The seller can always refuse to follow up, except to compensate the real estate agent who accomplished his mission, who found a buyer at the price of the mandate. He, therefore, remains free to accept a higher offer.

The purchaser who made the first offer at a price may legitimately feel aggrieved, but in the current state of the texts and the case law, he has no recourse, being third to the agency contract.

Overbid in the event of a sale by an individual

The situation is different; Hoguet law, which regulates the activity of real estate agents, no longer stands between the buyer and the seller. It follows that if the purchaser, after having visited, formally accepts the price offered in the advertisement, the sale may be considered to be perfect, and the seller may not reverse. Article 1583 of the Civil Code states that the sale “is perfect between the parties, and the property is acquired by the right to the buyer with respect to the seller, as soon as the thing and the price are agreed, although the thing has not yet been delivered or the price paid.” Still, the offer to purchase must be unambiguous, made with full knowledge of the facts, in particular of all the conditions of the sale, essential as well as substantial elements. In case of dispute, the courts will assess on a case by case basis: the agreement of the purchaser only in view of a sale announcement will be known to be insufficient to qualify the perfect sale. There are many other considerations than the thing and the price in a real estate sale, deadlines, financing, diagnostics, etc.

But after the offer has been formally accepted, the seller cannot retract.

He will, therefore, not be able to accept a higher bid.

Unless the offer is drafted rather as an agreement to enter into talks, with a clause such as “a compromise will be established no later than…, during which the parties will define all the conditions of the sale…” In this case, the seller may break the talks at will, but at the risk of owing damages to the buyer. He cannot be forced into a forced sale.

And unless the offer, although accepted, is considered by the courts only as a partial agreement, one or the other of the parties could not have had all the essential elements suitable for making an informed decision …

As we can see, the problem of overbidding real estate is complex, and it is authorized or prohibited depending on the context.