05 March, 2013

A Listing Agent’s Obligation to Disclose About Other Offers

 
In a hot market it’s not unusual for several prospective buyers to compete for the same property. What does the listing broker have to disclose about other offers to interested buyers in a multiple offer situation?
 The realtor Code of Ethics Standard of Practice 1-15 provides that “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 (when asked) whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker."
The listing broker’s failure to make this disclosure when asked violates Article 1 of the Code as interpreted by Standard of Practice 1-15.
The listing broker has a fiduciary duty to adopt and follow a policy on multiple offers that’s reviewed with the seller before any offers are received.
The policy should state that the seller will decide how multiple offers on their property are to be handled, because it’s the seller who may not get as high a price if some buyers aren’t told about other buyers' offers. It's also the seller who risks losing all offers if potential buyers back out after being told of other offers. The seller should understand the risks and instruct the broker how they’d like the situation to be handled.
If the seller gives the listing broker permission to tell buyers about other offers, the brokers in our area usually reveal only the existence of those other offers and not the amount or terms. However, it is advisable for buyers to sign a confidentiality agreement with their broker and include that agreement in the contract to ensure that the terms of their offer are kept confidential.
The realtor Code of Ethics helps ensure that all involved in a transaction are treated openly, fairly and on a level playing field to prevent unpleasant consequences.


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