Legal Blog - Standards and Ethics


Disclosure Accepted Offers With Unresolved Contingencies

Aug 30, 2016

Standards and Ethics

Case #3-10: Disclose Accepted Offers with Unresolved Contingencies (Adopted May, 2004.)

REALTOR® Eisenhower listed Seller Taft's house and placed the listing in the local association's MLS. Within a matter of days, REALTOR® Nixon procured a full price offer from Buyer Roosevelt. The offer specified that Buyer Roosevelt's offer was contingent on the sale of Buyer Roosevelt's current home. Seller Taft, anxious to sell, accepted Buyer Roosevelt's offer but instructed REALTOR® Eisenhower to continue marketing the property in hope that an offer that was not contingent on the sale of an existing home would be made.

A week later, REALTOR® Harrison, another cooperating broker working with an out-of-state transferee on a company-paid visit, contacted REALTOR® Eisenhower to arrange a showing of Seller Taft's house for Buyer Clinton. REALTOR® Eisenhower contacted Seller Taft to advise him of the showing and then called REALTOR® Harrison to confirm that he and Buyer Clinton could visit the property that evening. REALTOR® Eisenhower said nothing about the previously-accepted purchase offer.

REALTOR® Harrison showed the property to Buyer Clinton that evening and Buyer Clinton signed a purchase offer for the full listed price. REALTOR® Harrison left the purchase offer at REALTOR® Eisenhower's office.

REALTOR® Eisenhower informed Seller Taft about this second offer. At Seller Taft's instruction, Buyer Roosevelt was informed of the second offer, and Buyer Roosevelt waived the contingency in his purchase offer. REALTOR® Eisenhower then informed REALTOR® Harrison that Seller Taft and Buyer Roosevelt intended to close on their contract and the property was not available for purchase by Buyer Clinton.

REALTOR® Harrison, believing that REALTOR® Eisenhower's failure to disclose the existence of the accepted offer between Seller Taft and Buyer Roosevelt at the time REALTOR® Harrison contacted REALTOR® Eisenhower was in violation of Article 3 of the Code of Ethics, as interpreted by Standard of Practice 3-6, filed an ethics complaint with the association of REALTORS® .

At the hearing called to consider the complaint, REALTOR® Eisenhower defended his actions, noting that while Buyer Roosevelt's offer had been accepted by Seller Taft, it had been contingent on the sale of Buyer Roosevelt's current home. It was possible that Buyer Roosevelt, if faced with a second offer, could have elected to withdraw from the contract. REALTOR® Eisenhower argued that continuing to market the property and not making other brokers aware that the property was under contract promoted his client's best interests by continuing to attract potential buyers.

The Hearing Panel disagreed with REALTOR® Eisenhower's justification, pointing to the specific wording of Standard of Practice 3-6 which requires disclosure of accepted offers, including those with unresolved contingencies. REALTOR® Eisenhower was found in violation of Article 3.

*The names in this case are fictional and are based on the names of past presidents.

Staff Note: A few sellers have tried to get around these rules by including provisions in the sales contracts where the buyer authorizes the seller to leave the listing as "active" rather than as "under contract" or "contingent with kick out." Please be advised that such actions violate MRIS Rules and Regulations and could be the basis for a violation of Article 3 of the Code of Ethics. Your clients cannot instruct you to violate a rule simply because it would be in their interests for you to do so. If the seller does not like the MRIS rules then he or she is not obligated to authorize you to use the system to facilitate the sale of the property.
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