Confidentiality Agreement Can Keep Offers From Being 'Shopped'

Real Estate Agent with RE/MAX

When inventory is low and demand is strong, a well-priced listing is likely to elicit multiple offers. The existence of multiple offers can often be the occasion of confusion and frustration, especially if the listing agent engages in behavior known as "shopping the offer." Shopping an offer occurs when the listing agent informs the agents of other prospective buyers as to the terms of some offer that has already been presented. The purpose of this is to get the seller a better offer from one of these other buyers. Typically, when shopping an offer, only the most relevant terms of the first offer will be revealed. For example, "We already have $575,000 on the table; you will have to beat that." Sometimes financing will be referenced, e.g. "They only have 10% down, and we'd like to see a stronger borrower." Or, perhaps the length of escrow is the issue, "The offer is full price, but the buyer insists on a three-month escrow." The possible variations are endless.


Shopping an offer is neither illegal nor is it a violation of the Realtor® Code of Ethics, as long as it is done with the seller's permission. In fact, the Realtor® Code of Ethics imposes on buyers' agents the affirmative duty to inform prospective buyers, or renters, that their offer may not be treated as confidential. Standard of Practice 1-13 #5 requires that a buyer be informed of "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)


While I have absolutely nothing but sparse anecdotal evidence for this, I suspect that not many real estate agents do that. When you are about to write an offer, or are in the process of writing one, it's not a conversation one really wants to have. (Which, like making property disclosures, is probably a good indication that you should do it.)


One reason an agent might be reluctant to enter into such a discussion is that the buyer might then ask the agent to prepare a confidentiality agreement. What's an agent supposed to do then? To draft such an agreement from scratch would probably expose the agent to a charge of practicing law without a license. And the agreement itself might not be a very good one. Yet, it's a fair bet that most agents don't have, or don't know if they have, a fill-in-the-blanks pre-printed confidentiality agreement.


California REALTORS® are fortunate in this regard. A "Confidentiality and Non-Disclosure Agreement" (form CND) was prepared by the legal department of CAR (California Association of REALTORS®) and has been available in the zipForms® library since November of 2012. The agreement provides space to specify what information is to be kept confidential (e.g. buyer's name and/or offering price and/or terms offered) and provides that "…the other party and its agents agree to keep the information confidential and not to disclose it prior to, during the pendency of, or after the completion or termination of any transaction that may result from the Proposed Agreement [the offer], except as authorized by the MLS rules or applicable law."


It is made clear that if the seller accepts the Confidentiality and Non-Disclosure Agreement (CND) that does not bind him or her to accept the offer itself.


Agents who use the CND will want to remember that it needs to be presented to the seller prior to the presentation of the offer itself. You wouldn't want to present it simultaneously with the offer. What if the seller didn't agree to it? Buyers who want confidentiality don't want sellers to know what's in the offer -- or, perhaps, who is making the offer -- until there is an agreement not to make it public.


Bob Hunt is a director of the California Association of Realtors®. He is the author of Real Estate the Ethical Way. 



Written by Bob Hunt


Comments (1)

Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Sharon, great post, as seeing multiple offers are a common occurrence around here too, and interesting to see how different agents handle them.  

May 19, 2015 11:01 AM