Q: I was working with a Buyer who wanted her Offer kept confidential. I notified the Listing Agent that the Offer was to be kept in strictest confidence; the Listing Agent assured me that no one would know the terms of that Offer, so I forwarded my client’s Offer to the Listing Agent. I just learned that the Seller showed my client’s Offer to another Buyer during contract negotiations! I am livid. What can I do?
A. Despite the oral communications that you had with the Listing Agent, your client’s Offer was not confidential, and the Seller was entitled to share the terms of that Offer with anyone. To be legally enforceable, a Confidentiality Agreement must be in writing, signed by all Parties and delivered to all Parties. If any of those required steps are missing, the Offer is not confidential; there is no Confidentiality Agreement.
I. BACKGROUND
After the National Association of REALTORS® confirmed that it was ethical for Listing Agents to disclose the terms of a Buyer’s Offer to other interested parties (often referred to as “shopping Offers”), it became clear that Buyers needed to be warned that their Offers were not automatically confidential. Thus, since 2006, the CAR Statewide Buyer Seller Advisory (“SBSA”) has included a section regarding the non-confidentiality of Offers. The SBSA currently states:
“NON-CONFIDENTIALITY OF OFFERS: Buyer is advised that Seller or Listing Agent may disclose the existence, terms, or conditions of Buyer’s Offer, unless all parties and their agent have signed a written confidentiality agreement (such as C.A.R. Form CND). Whether any such information is actually disclosed depends on many factors, such as current market conditions, the prevailing practice in the real estate community, the Listing Agent’s marketing strategy and the instructions of the Seller. Brokers do not have expertise in this area.”
However, because a Seller may wish to keep the offer price or other terms private, Sellers’ Agents should only disclose information contained in Offers they receive with the written approval of Seller.
Logically, if a “confidentiality” provision is included in an Offer or is in a separate document that accompanies the presentation of an Offer, that confidentiality provision will have no legal effect on the Seller or the Listing Agent until it is fully signed and returned to the Buyer’s Agent. If an Offer that contains a confidentiality provision is not accepted and/or the accompanying Confidentiality Agreement is not signed, the information in the Offer does not need to be kept confidential by either the Seller or Listing Agent.
II. HOW TO MAKE AN OFFER CONFIDENTIAL
If a Buyer wants any or all terms of their Offer kept confidential, a written Confidentiality Agreement must be in place BEFORE the Offer is presented. That means the Buyer’s Agent must receive the fully-signed Confidentiality Agreement from the Seller and Listing Agent before presenting the Offer.
Some Buyers who are “high profile” individuals (such as professional athletes and television personalities) will have their own legal advisors create a Confidentiality Agreement; for the rest of us, CAR has created the Confidentiality and Non-Disclosure Agreement (“CND”) form. It allows the Parties to pick and choose what information is to be kept confidential. Regardless of which Confidentiality Agreement is used, it has no legal effect until all the Parties sign it and deliver it.
If a Seller and/or Listing Agent will not sign the Buyer’s requested Confidentiality Agreement, then it is up to the Buyer to decide whether or not the Offer should still be presented. The Buyer should be asked to provide written instructions (such as in an email) stating whether or not the Buyer wants the Offer presented if the Confidentiality Agreement is not signed by the Seller and/or Listing Agent.
If it is later discovered that the Confidentiality Agreement has been breached, it is up to the Buyer, in consultation with their own qualified California real estate attorney, as to whether or not to take legal action. It is not appropriate for the Buyer’s Agent to give any advice or get involved in that type of claim.
PRACTICE TIPS:
BUYERS’ AGENTS:
- Buyers’ Agents need to make sure that Buyers understand that their Offers are not automatically confidential and the terms of their Offers can be revealed by the Seller and Listing Agent to other Buyers.
- Buyers’ Agents should ask whether the Buyers want the terms of their Offers kept confidential. If the Buyers want their Offers kept confidential, then the Buyers can use either the CAR Confidentiality and Non-Disclosure Agreement (“CND”) form, or, if they have specific legal concerns regarding use of the CND form, then they can retain a qualified California real estate attorney to draft a specialized Confidentiality Agreement. Real Estate Agents should not attempt to write any type of confidentiality provision.
- If Buyers sign a Confidentiality Agreement, it will have no legal effect until it is fully signed by the Seller and Listing Agent and delivered; it needs to be accepted by everyone before the Offer is presented.
- If the Listing Agent and/or the Seller will not sign the Buyer’s Confidentiality Agreement, the Buyer needs to decide whether or not the Offer should still be presented. It is best to get the Buyer’s decision in writing (such as in an email) at the same time the Buyer signs the Confidentiality Agreement. No special form is needed. The Buyer’s Agent should then follow the Buyer’s written instructions.
LISTING AGENTS:
- It is the Seller’s choice as to whether or not to reveal the terms of any Buyer’s Offer.
- Listing Agents need to be aware of a potential conflict in dual agency situations. If a Seller instructs their Agent to disclose the contents of a Buyer’s Offers to other potential buyers, and the Buyer whose Offer is to be shared with other potential buyers is represented by the Listing Agent’s brokerage, then revealing the contents of that Offer can only be made with the written permission of the Buyer who is represented by the Listing Agent’s brokerage. If that permission cannot be obtained, Listing Agents should immediately contact their Broker or Manager for guidance on how to proceed.
- If the Seller agrees to sign a Buyer’s Confidentiality Agreement, then the Listing Agent and Seller must abide by the terms of that Agreement; unless there is a termination date for the Confidentiality Agreement (there is no end date in the CND form), the Offer must remain confidential even after C.O.E.
ATTORNEY-CLIENT PRIVILEGED COMMUNICATION: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is 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 05/14/21