If you’ve ever attended a real estate auction, you’ll have quickly discovered it’s a very simple process: people make bids viewed by everyone else in the room. As the prices increase, buyers may move in and out of the bidding, but everyone is aware of all the bids and the final price is no secret. It’s a noisy, hyperactive and frenetic process, BUT … it’s very clean, transparent and neat. And when the gavel goes down and the deal is done, there is no confusion about who bought the property and for how much.
Submitting an offer on a property on the local MLS is different.
If you write an offer on a property and your contract is the only one submitted, it’s really a very simple process: you negotiate with the seller with counter offers and, when the terms have been agreed upon, the deal is set and you go into escrow. Can’t agree? Move on.
It’s different with multiple offers.
Want to know how much others are offering so you can effectively compete? Good luck with that: many listing agents refuse to divulge any information about existing offers. Especially if it’s a foreclosed home. It’s secretive and hidden. Confusing. Incredibly frustrating.
In fact, some Realtors actually believe it’s illegal and/or unethical to share offer information.
Fact #1: It is NOT illegal. Or unethical.
To ensure that disclosure is consistent across the state, the California Association of Realtors issues standard contractual forms used by Realtors statewide. One of the forms, DISCLOSURE AND CONSENT FOR REPRESENTATION OF MORE THAN ONE BUYER OR SELLER (Form DA), includes the following text:
“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 confidentially agreement.
In other words, it is totally legal and ethical to share any pertinent information from any offer with anyone else deemed relevant to the transaction UNLESS there is a written confidentially agreement signed by ALL parties involved.
Fact #2: Real estate practices differ from area to area, office to office and agent to agent, seller to seller.
Form DA goes on to say:
“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.”
Although we include this disclosure as a part of every transaction (buyers AND sellers), many Realtors simply don’t know about this form and/or clause. Others don’t understand it. Yet others dislike the idea or ignore it all together. Although real estate practices differ from area to area, the truth remains statewide: if there is no confidentiality agreement in place, any and all facts of an offer may be freely shared.
Fact #3: To prevent disclosure of any information, a written confidentially agreement must be signed by ALL parties.
ALL parties include the following: the buyers, the sellers and the agents from both sides. If all do not sign, there is simply no agreement. No agreement, no confidentiality. And it’s not enough for a buyer to submit a confidentially agreement with an offer: if it’s not signed by the other side, it’s not valid. And there are plenty of reasons why a party may not wish to sign, ESPECIALLY the seller (See Fact #4).
Fact #4: It may be in seller’s best interest to share offer details.
Listing agents need to thoroughly discuss this concept with their sellers. Depending on the nature of the offers, the amount of information revealed may or may NOT be in the seller’s best interest. As an example, if a property has one or more strong offers, a seller might want their agent to disclose the amounts and/or terms to generate even better offers. If, however, existing offers are low, revealing the amounts could limit the quality of any subsequent bids. A wise listing agent will weigh the variables carefully before disclosing information.
Some agents simply refuse to disclose any information. In my opinion, this mindset can constitute a breech of fiduciary responsibility to their seller.
In addition, it can result in meaningless efforts on behalf of buyers and their agents who are operating totally blind. Having represented hundreds of buyers, I’ve grown to appreciate the fact that the more information I have before writing an offer, the better. It can also save countless hours of wasted time and effort: if I know there are better offers on the table than my buyer can compete with, we will not waste anyone’s time by writing a pointless offer. It’s better to move on to another property where we actually have a chance.
Some listing agents prefer the concept of “highest and best” offers. Buyer agents HATE this practice.
This practice is VERY exasperating for buyers and their agents and may potentially harm the seller. It is a lazy practice at best and a breech of fiduciary responsibility to the seller at worst. (Click here for more on the topic of highest and best offers.)
Fact #5: Buyers Beware.
Form DA did not spark a movement to begin disclosing information on existing offers. Rather, it was designed to make buyers aware of a practice that was already in existence. Since there has historically been much confusion over this issue, the disclosure brings to light the POTENTIAL that a buyer’s offer information may be shared.
Bottom line: buyers need to understand that the details of their offers may be shared with others writing competitive offers.
It’s true. While some listing agents will not discuss terms of offers, others freely divulge information hoping it will net their sellers the highest possible price and best terms.
There’s a LOT of disagreement about this practice amongst real estate professionals.
Many ‘old-school’ agents who’ve been around for years (especially before the advent of the Internet) prefer to keep offer information secret. They don’t think it’s a ‘fair practice’ to disclose information. If there is going to be an auction or bid for a home, they prefer the idea of a “sealed-envelope” auction or ‘secret auction.’
On the other hand, many looking to buy a home in the current marketplace have grown to appreciate the free flow of information afforded by the internet and its’ resulting transparency. They want the home-buying process to resemble an ‘open’ auction where all the bids are out on the table for all to see. Agents that have begun their practice after the internet revolution also tend to prefer this type of transparency. I, for one, favor this approach.
Whichever school your agent belongs to, if you’re looking to buy OR sell, you absolutely need to make sure you discuss this with your Realtor so you are all on the same page. After all, the more you know, the better.