Should Seller Sign Confidentiality Agreement?

September 27th, 2021 at 2:17 pm

Question: Last week’s Legal Tip was a discussion about how a seller has no legal obligation to comply with a C.A.R. Confidentiality and Non-Disclosure Agreement (CND) that is submitted along with a buyer’s offer. But what if a buyer asks a seller to sign a CND before the buyer will submit an offer? Should the seller sign the CND? 

Answer: It is up to the seller, not us as the listing agent, to decide on a case-by-case basis, whether the seller should sign a buyer’s CND. Here are some factors for a seller to consider:

1. Celebrity Buyers: Sellers of high-end properties will generally consider agreeing to a CND request from a celebrity or other high-profile buyer, who presumably has the means to pay top dollar for the property, but wants to maintain his or her privacy.

2. Multiple Offer Situations: In the current hot market, some non-celebrity buyers in multiple offer situations may also request a CND to avoid being used as a pawn in a bidding war, e.g. if another buyer uses an escalation clause. However, sellers in multiple offer situations generally do not capitulate to a CND. A seller who already has or expects to receive 10 offers is unlikely to accommodate Buyer #11’s CND request.

3. Creating a Bidding War: Absent a multiple offer situation, a seller considering a CND must decide whether the seller would like to try to use this buyer’s offer to create a bidding war to drive up the price. That may make sense for certain sellers, depending on things like the price range, days on market, general interest in the property, and saleability of the property. Generally speaking, a seller who wants to try to create a bidding war should not sign a CND.

4. General Market Conditions: If the housing market cools down, a seller may be more inclined to accommodate a buyer’s request for a CND.

5. Disclosure to Family Members and Others: Some sellers want to share the details of their home-selling process with family members, friends, attorneys, or accountants. Absent a carve-out, a seller who signs a CND cannot share confidential information, except as authorized by the MLS or applicable law.

-Thank You to Kim Rouggie O’Rourke (Calabasas 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 September 27, 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. Written by Stella Ling, Esq.

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