Confusion
Recently, while teaching an Ethics class, I realized that there is still a lot of confusion about the level of confidentiality in an offer to purchase. Certainly we all know that Contracts, once ratified, are confidential; but what about the Buyer’s Offer to Purchase the property? The short answer? Absent an agreement between buyer and seller, there is no requirement for the Seller or Listing Agent to keep an offer confidential. It is the property of the Seller, once delivered
How Does This Effect the REALTOR?
If I am Buyer’s Agent and call you, the Listing Agent to ask about the presence of other offers – you can tell me that there are offers pending AND any and all of the details of such offers. Surprised? So are a lot of other REALTORS. That is why the Code of Ethics have made it a requirement to disclose to the purchaser that the offer may not be confidential. Absent an agreement to keep the offer confidential, the Listing Agent, with permission from the Seller, could send copies of your offer to purchase to any buyer agents who are being encouraged to write superior offers.
In 2006, the REALTOR Code of Ethics was updated to bring clarity to this issue.
Standard of Practice 1-13
When entering into buyer/tenant agreements, Realtors must advise potential clients of:
1) Realtors company policies regarding cooperation;
2) the amount of compensation to be paid by the client
3) the potential for additional or offsetting compensation from other brokers, from the seller or landlord, or from other parties
4) any potential for the buyer/tenant representative to act as a disclosed dual agent, e.g., listing broker, sub-agent, landlords agent, etc., and
5) the possibility that sellers or sellers representatives may not treat the existence, terms, or conditions of offers as confidential unless confidentiality is required by law, regulation, or by any confidentiality agreement between the parties.
(Adopted 1/93, Renumbered 1/98, Amended 1/06)
Standard of Practice 1-15
Realtors, in response to inquiries from buyers or cooperating brokers shall, with the sellers approval, disclose the existence of offers on the property. Where disclosure is authorized, Realtors shall also disclose whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker
(Adopted 1/03, Amended 1/06)
Note that in Standard of Practice 1–15, the REALTOR is advised that they must disclosure the other offers (with seller’s approval). The REALTOR must also tell the inquiring Buyer Agent who the author of the Offer to Purchase is. This is important to the Buyer Agent, in that a Dual Agent writing an offer; or Designated agent in the same office writing an offer may have benefits they can negotiate away to position their offer better.
Supporting Statutes?
There are currently no statues in Virginia protecting the Buyer’s Offer to Purchase in this regards. Since I am not an attorney, I asked Lem Marshall, the Legal Counsel for the Virginia Association of REALTORS where I could find something other than the Code of Ethics, to support this. Are there any statues that give me permission to release this information? Here is his answer:
Matthew: It works the other way. You don’t have to show that an unsolicited offer (that is, the seller didn’t seek out the buyer and ask the buyer to make an offer that was not otherwise being contemplated) can be shared; the offeror has to show the offeree agreed to keep it confidential or otherwise had a duty to do so. In order to assert a right to confidentiality, you can point to one of the following:A legal right. This can include a right imposed because of a relationship, such as attorney-client communications, doctor-patient relationship, priest-penitent confessions, etc., or imposed by common law or statute, such as the duty of an agent to maintain the confidentiality of the client’s information; or An agreement. This agreement can take any number of forms, and can be an understanding that something is told or done in confidence, such as the initial conversation between an attorney and prospective client.Neither of these is at work here. There being no legal duty or contractual agreement, seller is free to do with the offer what the seller pleases.So I can’t point you to any specific thing. You should ask the other guy why you have to keep it confidential. Regards, Lem
How does one protect their Buyer from having the Offer to Purchase used to facilitate better offers? The practitioner needs to disclose to their Buyer Client that the Principal is not subject to confidentiality. If the Principal (Purchaser) wishes to make the offer confidential, they will need to make a written request to the Seller before submitting their offer. The Seller and Buyer should have a written and signed agreement to maintain the offer in confidence, and then at that point the Selling Agent can submit their offer to the Seller.
I know that this adds yet one more disclosure to your daily activities, but for too long Listings Agents have been under the false thought that they must keep these offers and their existence secret. No longer. The REALTOR acting on behalf of the Seller is required to do everything in their power and within the context of real estate legislation to ensure the Seller gets the best possible offer.
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