Background: Last week’s legal tip addressed how buyers’ agents have a duty under the NAR Code of Ethics to inform their buyers that, absent a confidentiality agreement, the seller and listing agent might not treat the buyer’s offer as confidential. Buyers’ agents fulfill that ethical requirement by providing their clients with C.A.R.’s Possible Representation of More Than One Buyer or Seller (PRBS), which includes a section on “Offers Not Necessarily Confidential.”

Question: What about listing agents? Given that revealing competing offers is permitted by both the law and NAR Code of Ethics, should a listing agent reveal a buyer’s offer to a competing buyer and buyer’s agent? 

Answer: No, not necessarily. In a multiple offer situation, listing agents generally do not divulge a buyer’s offer to competing buyers. This approach is not based on legal or ethical requirements. It’s mostly based on other legitimate reasons, such as customary practices, past experiences, and a reasonable belief that keeping offers confidential is a fair and orderly method for helping a seller get the best possible offer.

As the listing agent, if your seller agrees with keeping offers confidential, then do that. If, however, your seller insists that buyers’ offers be revealed to competing buyers, here are some guidelines for you to consider following:

1. Get It in Writing: Get your seller’s instructions to reveal offers to competing buyers in writing, because you do not want the seller to later claim that you were not supposed to do that.

2. Give Buyers’ Agents a Head’s Up: Many buyers and buyers’ agents do not realize that a seller is not required to keep a buyer’s offer confidential, and we do not want to unnecessarily upset them either. Before you reveal a buyer’s offer to competing buyers, let that buyer’s agent know what you plan on doing (and direct the buyer’s agent as needed to the “Offers Not Necessarily Confidential” disclosure in the PRBS).

3. Be Fair: If we are revealing offers, tell every buyer’s agent what every competing buyer is offering. To reveal competing offers to some buyers, but not to all buyers, seems unfair, and may run afoul of, among other things, fair housing laws prohibiting discrimination as well as Article 3 of the NAR Code of Ethics requiring you to cooperate with other brokers.

4. Do Not Misstate the Law: Sellers are not required to disclose competing offers to buyers. As the listing agent, you can explain to people that your seller does not want to reveal competing offers. You should not, however, say that revealing competing offers is “illegal” or “unethical,” because that would be untrue.

-Thank you to Denny Kagasoff (Beverly Hills Office) for suggesting this week’s legal tip!

Copyright© 2021 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of March 15, 2021. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.