Question: Under the old Agency Statute when a Broker was a dual agent, I understood that the agents could not disclose what a Seller will accept or what a Buyer will pay for the property. It is my understanding that there are new rules. Are there new forms regarding this issue? Can you provide us with any guidance on the changes?
Answer: Effective January 1, 2019, everyone needs to use the newly-revised statutory form entitled Disclosure Regarding Real Estate Agency Relationship (C.A.R. form AD 12/18 or the PRDS® READ 12/18) which includes the new requirements for what dual agents must keep confidential.
The original version of the Agency law stated that dual agents could not “without the express permission of the respective party, disclose to the other party that the Seller will accept a price less than the listing price or that the Buyer will pay a price greater than the price offered.”
The newly revised Agency Statute (Civil Code Sections 2079.13 -.24) has expanded what must be kept confidential by the dual agent (the changed language is shown below in red print):
“In representing both Seller and Buyer, a dual agent may not, without the express permission of the respective party, disclose to the other party confidential information, including, but not limited to, facts relating to either the Buyer’s or Seller’s financial position, motivations, bargaining position, or other personal information that may impact price, including the Seller’s willingness to accept a price less than the listing price or the Buyer’s willingness to pay a price greater than the price offered.”
Agents are often made privy to confidential information about why Sellers want to sell such as a change in job status, the need to relocate to take care of ailing relatives or the possibility of a divorce, to cite just a few examples where the Sellers may need to move quickly. These are factors that can change the Sellers’ bargaining position. This is the type of Seller information that the dual agent must keep confidential UNLESS the Seller gives the agent written authorization to reveal those motivations.
Agents are often made privy to confidential information about why the Buyers want to buy, such as a job transfer, the need to get their child into a particular school, or that the Buyers are buying up multiple properties in the neighborhood for future development. The Buyers’ motivation to buy, especially if there is a timing issue, is a factor that can change the Buyers’ bargaining position. This is the type of Buyer information that the dual agent must keep confidential UNLESS the Buyer gives the agent written authorization to reveal those motivations.
REALITY CHECK: The same information that the dual agent must keep confidential regarding the clients’ motivations and willingness to accept certain price breaks should also be kept confidential when an agent is only representing the Seller or only representing the Buyer.
EXAMPLES OF SELLERS’ INFORMATION THAT IS NOT CONFIDENTIAL:
If the Seller’s motivation to sell is because specific issues with the property such as problems with the condition of the property or problems with a neighbor or the neighborhood, this would not be deemed “confidential information” and must be disclosed to the Buyer.
If the Seller’s motivation to sell is because of a pending legal action that can impact how the transaction is to be handled or which might require court approval, such as bankruptcy, probate, or divorce actions could impact the Buyer’s ability to buy or, at a minimum, delay the close of escrow. Legal proceedings become “of public record” when the action is filed and thus are not truly personal confidential information. As such, that type of information would probably need to be disclosed to the Buyer.
If the Seller’s motivation to sell is because of a pending foreclosure action, the existence of a Notice of Default or the need to secure short sale approval, these are issues which impact the Buyer’s ability to acquire the property and/or impacts the type of documentation that must be used in the transaction. As such, the existence of these impediments to the potential sale of the property would need to be disclosed to the Buyer.
EXAMPLES OF BUYERS’ INFORMATION THAT IS NOT CONFIDENTIAL:
If the ability of the Buyer to close escrow is subject to the sale of other property or subject to court approval of a financial disbursement to the Buyer, or anything which could impact the Buyer’s ability to timely meet the Buyer’s contractual obligations to the Seller, it is unlikely that this information will be deemed “confidential.”
PRACTICE TIPS:
- A client’s confidential, personal information about finances, pricing or motivations should not be disclosed to anyone, regardless of the agency relationships, unless the client has given written permission to disclose that confidential information.
- Do not use email/texts to communicate to clients, other agents or your broker/manager anything that is not permissible to be disclosed. Emails are discoverable and can be used against the agent who revealed confidential information.
- A form is not needed to secure the client’s authorization to disclose confidential, personal information — instead prepare a simple email confirming that the client “authorizes [insert name of agent] to disclose [insert the information].
- Clients cannot instruct agents to perpetrate a fraud by concealing material facts about the Property or the transaction.
- If there is any question as to whether specific information must be disclosed or kept confidential, Sales Associates should discuss the issue with their Broker/Manager who can then contact Broker Risk Management for additional guidance.
This Weekly Practice Tip is an attorney-client privileged document 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.
© Copyright Broker Risk Management 2018 11/09/18