The listing agent, Sarah, receives an offer from Ann-Lewise, the buyers agent. Ann-Lewises offer is a full price offer, all cash deal. Leslie, another buyers agent, submits a second offer. She asks Sarah if there are other offers on the property. Sarah answers that she just received another offer. Leslie then asks for the terms of the other offer. Sarah musters all the righteousness she can, and replies, I cannot tell you, such information is confidential! Is Sarah correct? Was Leslie unethical in her request for details about the offer?
There seems to be some confusion among agents about the confidentiality of an Offer to Purchase a property. Certainly we all know that contracts, once ratified, are confidential; but what about the buyers 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.
When Leslie asked Sarah about the presence of other offers Sarah could tell her that there were offers pending AND include details of such offers. Surprised? So are a lot of other Realtors®. That is why the Code of Ethics has made it a requirement to disclose to the purchaser that the offer may not be confidential. Absent an agreement to keep the offer confidential, Sarah, with permission from the seller, could send copies of Ann-Lewises offer to purchase to any buyer agents who are being encouraged to write superior offers.
The Code of Virginia specifically addresses the duty of confidentiality that is born out of the agent-client relationship but does not impose any duty of confidentiality for offers received by a seller. In this matter, agents are bound by the provisions of the Code of Ethics. In 2006, the Code 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) the 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; emphasis added)
Note that in Standard of Practice 115, the Realtor® is advised that they must disclose the other offers (with sellers 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 more favorably.
How does the Realtor® protect his or her buyer from having the Offer to Purchase used to facilitate better offers? The practitioner needs to disclose to the buyer client that neither the seller nor the sellers agent is subject to confidentiality. If the purchaser wishes to make the offer confidential, then that person 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 buyer agent can submit the offer to the seller.
For too long listing agents have been under the false impression that they must keep these offers and their existence secret. No longer. The Realtor® acting on behalf of the seller is required to protect and promote the interests of his or her client, which may mean disclosing the content of an offer to obtain a better bargain on another offer.