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:

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.

By Anne Johnson

Welcome to the new FAAR Forum. I’m honored to be the first FAAR Member to post an article. This is actually my first blogging experience ever so please forgive any fous pas. I was asked to write about something that is relevant to our market. Well, we’ve all heard the latest on foreclosures and short sales but no one has mentioned how to properly service these listings. It seems like I’ve encountered a lot of issues of less than professional and ethical behavior among my fellow agents lately. I was hoping we could review some common issues and explore how they can be resolved. Happy Blogging….

Despite the daily reports of misery and forecasted doom in the real estate market I find myself writing contracts on homes that have multiple offers on them. Just this week, I prepared an offer above asking price with no seller paid concessions and was out bid by 2 other offers. We were only in 3rd position of 7 total contracts. My client drove 5 hours one way from North Carolina to tour this one home. Doesn’t sound consistent with the news reports but talk to other Agents in the area and you will hear more of the same. So what’s causing this demand?

With increased pressure on the banks to move their inventory of foreclosed homes and minimize their financial losses, banks are offering homes at incredibly low prices. This increases interest and then we have bidding wars. Yes, bidding wars! Buyers are seeing these homes sell quickly. Gone are the days of the “on the fence” buyer. They’re making offers quickly and competitively. It would seem that all is right again. Not so, there are a lot of pitfalls in the market. Most I find are being created by our peers. So let’s talk about some of the issues that need to be addressed and if necessary referred to our local associations or the VREB for the proper correction action:

First, Agents if you have successfully obtained a relationship with one or more Lenders and are caring a large inventory of homes-Congratulations. However, you’re work has just begun. You must show due diligence to your client and complete customary tasks that would be expected in our market . Little things like lock boxes and photos.

The Code of Ethics Article 11
The services which REALTORS® provide to their clients and customers shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage; specifically, residential real estate brokerage, real property management, commercial and industrial real estate brokerage, real estate appraisal, real estate counseling, real estate syndication, real estate auction, and international real estate.

REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/95)

Answer your phones when agents call you-remember you must present all offers and counteroffers (oral & written) within a timely manner. How can you do this when you are not responding to multiple phone calls from your fellow Agents inquiring about your listings???

The Code of Ethics Standard of Practice 1-6
REALTORS® shall submit offers and counter-offers objectively and as quickly as possible. (Adopted 1/93, Amended 1/95)
The Code of Ethics Standard of Practice 1-7
When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing. REALTORS® shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord. REALTORS® shall recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract or lease. (Amended 1/93)

You absolutely MUST update the status of the listing in the MLS. Regardless of the Purchaser’s agreement to allow the home to continue to be marketed until settlement. You are obligated by the COE and MRIS Rules and Regulations otherwise. If you are starting the home inspection contingency and other deadlines based on verbal ratification from the bank, then you should acknowledge it as ratified in the MLS.

The MRIS Rules and Regulations state that the listing agent must make any revisions to a listing within 48 hours (excluding weekends and holidays). This includes all changes in the terms or condition of the property such as a price change, acceptance of a ratified contract, an expired contingency date that has been satisfied or extended, an expired settlement date that needs extended, or a sale that has taken place.

The Code of Ethics Standard of Practice 12-8
The obligation to present a true picture in representations to the public includes information presented, provided, or displayed on REALTORS®’ websites. REALTORS® shall use reasonable efforts to ensure that information on their websites is current. When it becomes apparent that information on a REALTOR®’s website is no longer current or accurate, REALTORS® shall promptly take corrective action. (Adopted 1/07)

This is not just common courtesy for Buyers and the their Agents that are touring homes that are already under contract, but you are also making the market appear to have more inventory than it truly does. This affects our regional stats.The average DOM was just used in a FLS article once again stressing how overburdened our market is with homes that won’t sell. Let’s keep the record straight.

Just like any client, have the proper amount of support staff to assist you in handling this business. There are some top notch offices that have wonderful full time staff always available. They actually know what the home looks like and what’s is status is when you make inquiries. Keep up the great work! If you can’t handle it, don’t take it. It only makes the rest of us look bad.

Just one more thing. Agents-please think long and hard before taking a listing on a short sale when you know the home is upside down by over a $100,000 and you can’t get the bank to communicate with you. For your own sanity and others, please know when you need to walk away. I’m researching every short sale to determine if it is a good selection to show my clients and I find these $200,000 difference some with PMI or government insured loans and know that the likelihood of this getting approved by the bank is as good as me losing 5 lbs while I’m writing this article. Ain’t going to happen folks! This again makes our market look much worse than it is because it’s increasing our inventory with unsuccessful listings.

If you do have a short sale that you have been able to get through, do not allow the bank to bully you and your fellow cooperating brokers into “accepting” what they will give you at closing, if they feel like it, maybe… Absolutely not. You are a professional and have provided a service and are entitled to be compensated for the work you have done. If they want to improve their net suggest the Bank Representative kick in their 2 weeks paid vacation this year to help our the banks bottom line. Once again, not going to happen. Believe you are worth it and so it shall be.

Good Luck my friends. I hope you have a very prosperous year and happy blogging.