New Jersey Estates/Weichert Realtors/ NJ Luxury Real Estate/ New Homes: Disclosure of Existing Offers May Be of Help to Seller

Disclosure of Existing Offers May Be of Help to Seller

It comes as a surprise to many buyers and sellers, and often to their agents as well, that - absent any specific agreement to the contrary - the existence and terms of an offer may not be treated as confidential.

Some listing agents, however, are not always eager to share information about existing offers. There are various explanations for this. A rather obvious one is that the existing offer may have been solicited by the listing agent himself. He has little incentive to work the market to see if he can find a competitor who will bring in a better offer than the one he himself has procured. Doing that would generate less commission for him. (Yes, this does illustrate one of the potential problems with dual agency.)

A more prosaic reason for a listing agent to be uninterested in letting others know about an existing offer is that he may simply want to avoid the extra work involved with more offers. Getting offers presented on a short sale or an REO ("real estate owned" - a foreclosed property) is generally a more involved process than bringing one before Mr. and Mrs. Typical Seller. In the best of circumstances there is still an institutional procedure to be followed, and during standard business hours at that. And then it takes longer to get an answer.

Suppose the situation where the listing agent doesn't have an offer of his own. In all likelihood, even if a price does get bid up - a result that is better for the seller - it isn't going to make a significant difference in the listing agent's commission. So why bother?

Not all real estate agents are Realtors®; but, if the agent in question is a Realtor® -- one who thereby subscribes to the Code of Ethics of the National Association of Realtors® (NAR) - he will need to be aware that the Code has something to say about this situation. Standard of Practice 1 - 15 of the Realtor® Code says: 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 firm, or by a cooperating broker.

Two things are important to note about this Code of Ethics requirement. First, such disclosure must come with the seller's approval. If the seller doesn't want these matters disclosed, then the listing agent must not do so. But what if the seller simply hasn't been asked? Clearly, then, the seller has not given his approval. But the seller should be asked. That is a conversation the listing agent should have with the seller fairly early on.

We have noted that it is generally in the seller's interest for competing buyers to know that there is another offer or offers. The seller should be made aware of the pros and cons when he is asked whether or not he would approve of disclosure. A failure to discuss this with the seller might be deemed a breach of fiduciary duty.

Secondly, it is to be noted that, if the seller has given approval, then the existence of other offers is to be disclosed in response to inquiries. There is not a general affirmative duty to disclose the existence of other offers to those who do not ask about it. This is also true of the duty to disclose the agency source of the other offer(s). That information does not have to be volunteered if there is no inquiry.


Written by Bob Hunt
January 27, 2009