When entering into buyer/tenant agreements, REALTORS® must advise potential clients of:
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)NAR Code of Ethics, Standard of Practice 1-13
In most cases, the existence of a buyer’s offer is not confidential. However, in most cases, the terms of a buyer’s offer are confidential. This is determined by the seller(s) and listing broker(s) when they execute a Listing Agreement:
Most sellers, in conjunction with their brokers, check the existence box in the listing agreement. The prevailing though here seems to be that the checking of this box simply allows a broker to speak truthfully in response to the question “are there any offers on the property.” It’s hard to make a case for a seller not checking this box, in most cases the disclosure of an existing offer encourages additional buyers to submit better offers. It is possible, of course, that a buyer could be dissuaded from making an offer knowing that other offers already exist, but in an inventory starved market many buyers will still choose to submit.
The checking of the terms box, however, can give many brokers, and therefore their sellers, consternation. The ability of a broker to disclose the terms of offers in response to inquires from buyers or cooperating brokers may not serve the seller’s best interests in all circumstances, but in the case where multiple buyers are competing for a hot property, disclosure of the terms of offers received might increase the amount of competing offers and net the seller additional dollars. This would, in almost all cases, be in the sellers best interest. Brokers who believe they should never check the terms box need to understand there is nothing unethical about this and should be reminded it’s the seller choice to decide which boxes to check.
In a slow market, the disclosure of terms of offers is not, in most cases, advisable since offers received (where there is more than one), may be for considerably less than list price. In other words, the strategy could easily backfire.
When the terms box is not checked by the seller, the terms of offers received should not be disclosed, and therefore are confidential. The listing broker’s ability to “shop” offers (where the listing broker leverages one offer against others by disclosing the price or one of the terms of the offers) is prevented, and a broker who does so would be in default if the Listing Agreement.
Remember too what Broker Duties say when it comes to confidentiality:
“Unless otherwise authorized in writing, a broker who is directly providing real estate services to a seller shall not disclose the following to a buyer in the transaction: that the seller has previously indicated he/she will accept a sale price less than the asking or listed price;”
“Unless otherwise authorized in writing, a broker who is directly providing real estate services to a buyer shall not disclose the following to a seller in the transaction: that the buyer has previously indicated he/she will pay a price greater than the price submitted in written offer;NMREC Broker Duties, section B numbers 7 and 8
Transaction brokers, therefore, should not be engaged in verbal negotiating of offers and counteroffers between their buyers and sellers.