The market has shifted. Multiple offers have slowed down, but sellers still want the best price for their property. In an effort to increase prices, sellers may ask their agents to reveal the terms of competing offers to the prospects. This is called “shopping an offer.”
Here’s an example. Even though their neighbors got 9 offers 6 months ago with no contingencies, no inspections and huge escalation clauses, their listing has produced only (!) 3 in 2 weeks. And the lowest price has the best terms – cash and a quick closing. The seller wants cash and a quick closing, if only that offer was as high as the best price. The seller instructs his listing agent to reveal the price of the highest offer to the buyer he wants in an effort to get that buyer to increase the price. Can the listing agent do that? Can the seller do that? Is it legal?
Duties of the Listing Agent to the SellerAs to the listing agent’s legal and ethical duties, if the agent represents only the seller, under both the license law and the REALTOR Code of Ethics, he owes a duty of confidentiality to the seller only, not to the buyer. So, yes, the listing agent can reveal the terms to another prospect, absent a confidentiality agreement. If there is a confidentiality agreement between the seller and the prospective buyer, the answer changes. Read on.
GAR F822, Agreement to Keep Offers Confidential
The only way a buyer can prevent such disclosure by a seller or a seller’s listing agent would be to negotiate a confidentiality agreement with the seller in advance of submitting an offer.
Here in Georgia, Realtors representing buyers have GAR F822, Agreement to Keep Offers Confidential, to use in this situation. To be effective, the Agreement to Keep Offers Confidential must be agreed by both parties prior to submitting the offer. The Agreement to Keep Offers Confidential provides that the terms of any offers, counteroffers, and other communications made by the buyer to the seller will be kept confidential by the seller and the seller’s broker and shall not be disclosed to third parties.
What if the agent represents both the seller and one of the potential buyers? That is, the agent is a dual agent. In this case, the agent owes a duty of confidentiality to the buyer as well as the seller. The agent would have to have the client buyer’s permission to reveal the terms of the client buyer’s offer to other offerors. It’s not likely that the buyer would agree. Because both the buyer and the seller would have had to consent to dual agency, the listing agent would not be required to violate the buyer’s confidence. The Seller themselves, on the other hand, could reveal the terms, so long as the seller has not entered into a confidentiality agreement with the buyer. This is another good reason not to be a dual agent. It gets complicated.
Code of Ethics Standard of Practice 1-13 (5)
Due to buyers’ confusion about the confidentiality of offers, Standard of Practice 1-13 of the NAR REALTOR Code of Ethics requires REALTORS to address this issue with their buyers. Under this Standard, REALTORS are required to advise their buyer about the possibility that the seller or listing agent may not treat the existence, terms or conditions of their offer as confidential unless the seller has agreed to do so under a confidentiality agreement.
Reference: Code of Ethics Article 1 Duties to Clients and Customers
• Standard of Practice 1-13 When entering into buyer/tenant agreements, REALTORS® must advise potential clients of: 1) the REALTOR®’s 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, subagent, landlord’s 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)
8/30/2022 12:47:14 pm
Aside from the question of legality, we as real estate practitioners have to co-exist with other real estate professionals long after any one transaction is completed. If I get a reputation of being an agent who always "shops my contracts," I may find myself being ostracized by other agents and potentially will not have as many offers on future listings, due to other agents purposely avoiding my listings due to the way I handled previous negotiations. So in my opinion, it is a good idea to point out the pros and cons to the Seller who wants me to shop a contract. For example, if I shop a contract, all the buyers who have made offers may get upset at how I am managing multiple offers, and they might all choose to withdraw their offers...leaving us with nothing. So although we are legally bound to do the best job for our seller clients and do what they tell us to do, sometimes we may need to guide our sellers down a more ethical path than they would potentially take themselves.
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