Q: I am the Seller’s Agent; Maria, an Agent writing an offer on that listing, asked me if there are any other offers on the property. I believe that there are going to be two other offers but I have not received them as yet. My Sellers wants me to state that we are “expecting multiple offers.”
A: A very real problem can be created by a Seller’s Agent speculating on how many offers he/she is expecting to receive rather than just being factual. If the Seller’s Agent states that there will be other offers and they do not materialize, the Seller’s Agent is in a lose/lose situation. If the Seller’s Agent doesn’t tell Maria that hers was the only offer, there could be a claim later by the Buyer that they were deceived into writing a higher offer; however, if Seller’s Agent tells the Sellers that they have to tell Maria the truth after potentially misleading her, and Maria’s Buyer withdraws his offer completely or writes a lower offer, the Sellers are going to be upset with their own Agent.
The problem for all Listing Agents is how to properly and ethically respond when other Agents ask how many offers they expect and/or how many they have already received. To work through the issue of disclosing other offers, first we must look to the the NAR Code of Ethics which states:
REALTORS®, in response to inquiries from buyers or cooperating brokers, shall, with seller’s approval, disclose the existence of other offers on the property. Where disclosure is authorized, REALTORS® shall also disclose whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker.”
Standard of Practice 1-15
A. Lessons from this Standard of Practice:
- In the absence of an inquiry from any Buyer’s Agent, there appears to be no duty to disclose if there are, or are not, other offers.
- It is a good practice to discuss with your Seller whether you are permitted to disclose the existence of other offers if requested. One argument in favor of obtaining Seller’s permission is that if there are multiple offers in hand, it will stimulate competition. On the other hand, if there are no other offers in hand, that may influence the Buyer to write a lower offer. The Seller must make an informed decision and needs to understand at the outset that under no circumstances can you misrepresent any information to a Buyer’s Agent.
- Regardless of which option the Seller picks, document the Seller’s instruction to you regarding disclosing other offers by sending an email to the Seller confirming the Seller’s choice.
B. Practice Tips for Listing Agents: Apart from the Code of Ethics, there are some practical considerations in how to respond to an inquiry from a Buyer’s Agent regarding the existence of other offers:
- Assuming that you have the Seller’s authorization, answer truthfully and precisely when asked by other Agents if there are other offers making certain that you distinguish between what you are anticipating receiving versus what has actually occurred.
- Do not suggest that you have offers unless they are actually received by you. You ethically and legally cannot misrepresent the number of offers.
For example, if a Listing Agent were to tell a potential Buyer’s Agent that there are two other offers when, in fact, there were none, that Buyer might make a decision that is adverse to their best interests by increasing their offer price in reliance on that representation. If this falsehood were to be discovered later (as when Buyer and Seller meet during the Walk-Through or after COE), that Buyer may claim damages against the Listing Agent because of the higher price paid. This could also be grounds for a DRE license violation.
- It is best to be very clear as to the distinction between what is anticipated and what is a reality. For example, in the current situation, the Listing Agent could legitimately say the following:
“I have heard from two other Agents that they are going to be writing offers but I do not have any other offers right now. I do not actually know how many offers I may have when it is time to present to the Seller. It could be just your offer or there may be others. Just tell your Buyers to make their best offer.”
- Consider sending that Agent an email confirming the statement above.
C. Buyer’s Agents: Do not be afraid to ask Listing Agents if there are other offers. Advise your Buyer of the answer and document your file regarding precisely what you were told and precisely what the Buyer was told. If you have any doubts at all, be certain to send an email to the Listing Agent confirming the information that was provided and copy the Buyer with that email. That documented answer from listing agent, and your advice to your buyer, may be helpful if there is a dispute later.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is attorney client-privileged and for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
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