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Dirty Little Secrets of Contract Confidentiality

Do you think that the purchase agreement /offer to purchase that you just wrote on your buyers behalf for their dream home is being kept confidential…

If you answer Yes…think again because in New Hampshire it MIGHT not be.

REALTORS® have an obligation Ethically to disclose to their buyer clients the fact that their offer may not be kept confidential and yes I am talking about the terms…i.e. offering price and or conditions…financing, deposit ,closing date all of which MAY be released by the seller to competing buyers in hopes of getting a better /higher offer.

This is sometimes called “shopping offers” and is being done fairly routinely but secretively in New Hampshire and other states. No one will talk about it because they feel uncomfortable about it…

I wrote about Article 1 SOP 1-13 in detail a while back in my blog but the summary of the Code of Ethics involving this reads as follows….

Standard of Practice 1-13

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.

I am curious as to how you all are handling this required disclosure if your state does not a have a law or regulation regarding contract confidentiality?

Is it a routine procedure in your state/area to disclose the terms? If so do the buyers you work with know this?

Does a prior (before purchase offer is released) confidentiality agreement work for you?

Every time I try to use one I get laughed at by the other REALTORS®…I mean who in their right mind would have their seller sign this type of stipulation.

Is this a problem in your area? Many REALTORS® I’ve spoken with tell me they just ignore the whole thing because everyone knows that listing agents have an unfair advantage in a co-brokerage situation anyway.

I think it’s interesting that our code of ethics removed the word fair a few years back and replaced it with the word honesty…

Your thoughts…

Jay and Monika McGillicuddy

Monika McGillicuddy

Serving Southern New Hampshire and Rockingham County

Monika McGillicuddy Real Estate Training Website

NH Real Estate Blogs

Prudential Verani Realty

Hampstead NH Real Estate

603-548-7728

Posted by Monika McGillicuddy~REALTOR®~ N.H. Real Estate Broker & Trainer on 11/26/2006 11:03 AM

Comments (35)

monika mcgillicuddy nh real estate training, nh real estate blogs, hampstead nh real estate, prudential verani realty

This post has been included in New Hampshire Information Rockingham County, NH Information Hampstead, NH Information

35 Comments on Dirty Little Secrets of Contract Confidentiality

NOV

2006

Monika,

GREAT post, and a great reminder that the law here in NH allows for this. I would bet that most agents in NH are completely unaware this can be done here. I knew it and had forgotten all about it until I read your post. I remember when this was being discussed, we were all appalled that this could happen, LEGALLY. But it can......

I've not encountered this here, that I'm aware of, so I have no real-life comments to add. Would love to hear if anyone else has encountered it.....

Ann

I have a few errands to run I will be back shortly.

"The Lovely Monika"

Sorry about that! I got diverted. The best way to get back to the post is to comment...Didn't have time so I parked. You didn't give me a ticket did ya'...

Okay, I have a comment. I think...

I really do not approve of this practice. But, I guess it really doesn't matter what I think. LAW IS LAW.

Personally I would never disclose terms unless instructed to do so by the Seller...

Although you can create Multiply Offers this way, what happens when all the Buyer's and their Realtors say "b*te me"...

That's probably not in the Sellers best interest. :0)

TLW "The Lovely Wife"...I Would Fill In That Letter But This Is A Public Post...ROAR!

Ann, Thats the problem...I think it happens often and we're not aware of it...anytime you feel stalled...or no one is getting back to you. I've found out after the fact that it happened because it is not something the other agent needs to tell you about. I hear all the stories when I teach so I know people are doing it and not disclosing that it can happen to buyers!

TLW...Where you going? Shopping? :)

Legal in AZ and fairly common practice - the "antidote" is to keep the response time tight to limit the time available to the Seller to shop it - lest your offer expire and they don't get another.

Monika, I don't know if this is done in Connecticut or not, I will have to ask one of my Realtors about this. Now you have me curious.

Oh my god...I got a gold star...so now what does that mean?

Tony.. If I remember correctly, your state felt this reqiuierment to disclose was no big deal at the NAR meetings...probably becasue it is common practice and everyone knows about it. In NH on the other hand it has always been legal as well and parcticed but kept a secert.

Geoprge ..Let me know what you find out.

Well, just yesterday I was in a situation where I had a buyer competing against the listing agent's buyer. I told my clients that it might be tough to beat, and that the terms of their offer would probably be shared. In this case, the listing agent also told me some things about the terms of her offer, which I shared right back with my client. We will know tonight who gets the house. If the seller had been local, I would have asked to present my offer in person, simultaneously with the LA's offer.

Monika, I will let you know.

By the way, a Gold Star means that you are a Featured Post. Click on "blogs" and look on the left side of the "dashboard" you will see yourself there.

CONGRATULATIONS!!!!!

Oh my god...George...you're right thats me up there! KEWL.

Maureen...I hope your offer gets accepted but just knowing what your up against makes a big difference.

I agree with the short response time. It hasn't been a big problem here, but we all know it happens.

Randy...In HI do you know if agents are all disclosing it to their buyer clients? I think if everyone knows it can be delt with fairly like in Maureens case. She was told about it and told her buyer.

TLW...I agree don't much like it but it happens. Up here it is also only if the seller directs the agents to do it. The "Bite Me" scenerio is very real and big rsk for the seller...if the competeing buyer knows about it to begin with. Most times they don't know.

In NC it's legal to disclose details to other parties WITH the seller's permission. I think it's actually better than the old blind bidding, where buyers could end up paying too much by guessing or paying just too little and missing out on the perfect house. by disclosing, we're getting stronger offers and the buyer agents are working with better information.

Leigh...Is it usually disclosed to all parties to even the playing field or just to one party to get them to increase their offfer? Sounds like if your getting stronger better offers it is probably disclosed to all potential buyers. Which is a good thing.

No secret. Agents disclose terms and conditions of competing offers to justify counter-offers. I expect it. Time is of the essense in these matters. The faster an offer gets to contract, the better.

Great to know that in Maryland it's all above board and honest. Your right no dirty little secrete when it's disclosed.

Hey I love "the Lovely Wife's" idea !! Wow, she is a smart lady !! If you comment on a specific blog then it basically bookmarks the blog in case you want to come back !!

Monika- Great Blog !!

when I've done it, when i have the sellers' permission, I disclose the information to all interested parties to make sure we're above board. it's actually reduced the number of 'forget you' buyers, since they know we're not playing a game-we have real offers and aren't playing that old game of acting like there are multiple offers in order to get the numbers up. =)

I was going to use RE terminology but I liked the "bite me" better. :0)...Glad you were not offended. I mean obviously you don't mind a few bites here and there! lol...Thanks Lauren. That is the result of losing my place all the time. I finally found a solution to that little problem! btw, if you don't mind the emails check the little comment box...TLW...ROAR!

Thanks Lauren...The TLW is a smart cookie!!

Leigh...Up here it is with the Sellers permission as well. I remember the days of fake multiple offers...or faking that one was coming in. ..just to entice someone to make an other.

TLW...Nope say it like it is or like you see it is fine with me. Bite Me is pretty clear..No? l like the bookmark idea but I often forget to check that little box.

The only problem I have ever had is a Seller lying to his neighbors of a higher price than the actual offer. You usually find out when the neighbor calls you to list his house because you were able to get such a great price for the seller.

Oh my god how true David. Been there a few times and the look on their faces is priceless when you show them what it really sold for.

Disclosure Disclosure you have to take care of your sellers as ethicly as posiible.

I do not know what the "Fa La La La Law's" permit in our state, but we always follow what our Sellers are comfortable with. However, I have never been in a position to even try to disclose the terms of an offer. The most that we say is, maybe, "strong offer" if someone else is trying to get another offer in under the wire.

Yah...I'd say it's pretty clear. That is Marianna above me. We probably need to tell her about The Chic Book Club...It's your post you do it. :0)..TLW...ROAR!

Mariana...you must go over to my blog and read the comments till you get to the Chic Book Club that we're starting up...a newbie club that TLW and I are doing...all inspired by your post!!!

TLW...we need to think of where our club needs to reside so it can be found???

Rob...it sounds so simple doesn't it...the 3 D's ..disclose -disclose-disclose...the problem happens when agents don't disclose! sadly!!

I can't imagine disclosing anything at all to anybody....why does anyone do that?

Just kidding.......!!! Great post Monika and WAY COOL with the gold star!!!

Ann

Thanks Ann. I was pretty surprised about it.

I am on it...TLW...ROAR!

I just posted which books I bought over here. I can't wait to get the books!!!

Monika....just an innocent bystander on this one.... me mortgage guy... lol

But I did pop in to learn a little more of what you realtors have to deal with and so I can familiarize myself with certain things...but never advise any of my clients...except to talk to lawyer. But it helps me, because I do have clients that buy fisbos and houses from their landlords.... thanks for the info.

NOV

2006

Good choices. I'd say we have bought enough books to last awhile :0)...TLW...ROAR!

Jeff...Thanks for stopping by. I think it's great that you want to know and understand about some of the stuff that we go through! Stop in anytime.

TLW...Got notified that my books shipped...Yippee!

DEC

2006

As Seller we have had an established negototiation ongoing with a potential buyer, our next door neighbor, over a period of more than a year. This negotioation history with two neighbors was memorialized in our listing agreement with our Seller's Broker as an exception to the Agreement's
commission terms. As an Estate Personal Representative (Executor) I feel that I have fiduciary obligation to obtain any competing or backup offers from the excluded parties as Seller, before making any final decision to accept or Counter any existing offer obtained by the listing Seller's Realtor. (exposing us to acceptance of our Counter).

I do not expect the Seller's Realtor or any Realtor to "shop the contract", as that might violate your duty to us or any dual agency Buyer: See National Association of Realtors Code of Ethics and Standards of Practice, SOP 1-13 (see: Par. 5), which reads:

"When entering into buyer/tenant agreements, REALTORS® must advise potential clients of:

The REALTOR®'s company policies regarding cooperation;
the amount of compensation to be paid by the client;
The potential for additional or offsetting compensation from other brokers, from the seller or landlord, or from other parties;
Any potential for the buyer/tenant representative to act as a disclosed dual agent, e.g. listing broker,
subagent, landlord's agent, etc., and
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)".

As far as I canb tell, these Standards apply to the Realtor, not to the Seller or Buyer themselves.
Is there any law or regulation in TX otherwise?

Richard, I can't help you with Texas law. But the Code of Ethics does only apply to REALTORS and not Sellers or Buyers or non REALTOR Licensee. So you as a non-REALTOR are not bound by the code in any manner. As fiduciary you do have lawful obligations but still not bound by a REALTOR code.

Hope this helps.

Thanks

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