Can a listing agent disclose our offer to another buyer?

Asked by Billy B., Burlingame, CA Sat Jan 23, 2010

Had a situation where we submitted a bid on a house in Burlingame. The listing agent verbally accepted on behalf of the sellers. On the day of execution, the sellers were "unavailable for signature." Turns out the listing agent showed the house to another set of buyers he was representing. His buyers (with knowlege of our offer) made an offer and won . . . this just doesn't seem right? What would you do?

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18
Holder Real…, Agent, Menlo Park, CA
Tue Apr 6, 2010
Hi Billy.

The listing agent did act unethically. I am not an attorney, so in no way does this response constitute legal advice. The agency relationship means that the listing agent speaks on behalf of his clients and has full authority to accept offers on their behalf, even verbally. Of course, the verbal acceptance would be followed up by a purchase contract that was executed by all parties, which documents the event and serves as proof that someone really did accept your offer.

That presents a difficult position for both you, the agent, and the seller. The agent most likely made a sweet deal with the sellers and the other buyers since he double ended the transaction, thus keeping the whole 5-6% commission. He likely reduced the commission and offered something to the buyers to make both sides happy while ensuring he made more money of the deal than if you had bought it. Normally its a good deal for everyone; however, not when there is a chain of events like yours leading up to it.

The confidentiality of your offer is not the issue here - and your offer is not confidential unless you write that into the contract, which the seller will never accept.

The issue at hand is summarized in the agency disclosure form, which states that the listing agent has a fiduciary duty to do what is in the best interest of their client, the seller, and a responsibility to be honest and fair dealing with the public, you. Obviously, he forgot the latter.

You could call the office manager where the listing agent works, but it is likely they will tell you to go pound sand and bet that you won't bring forth a lawsuit. You can also issue a formal complaint with the local Board of Realtors, either SILVAR or SAMCAR depending on where they joined, and with the DRE.
Web Reference:  http://www.atlistings.com
2 votes
The Laugesen…, Agent, Burlingame, CA
Sat Jan 23, 2010
Dear Billy
I had this exact experience being the listing agent , however the offer in the end was not mine that was accepted but an offer from my office. We communicated acceptance to another agent and before we could sign, as it was a multiple offer situation, one of the families that wrote an offer that was lower than the offer we verbally communicated acceptance, came in while doing the paperwork, and they had in their hand another offer written that was 100,000 higher and as is. I did not shop that offer, my clients, being the sellers felt horrible, in fact were apprehensive to accept the offer, I had to talk them into accepting, this offer was BEST for my sellers. Nothing was shopped, nothing was disclosed, and sometimes this happens. I am sure the other agent thinks something hanky panky went on, however it DIDN'T
I am so sorry for you and I feel your pain. The listing agent has a fiduciary responsibility to do best by the seller.

Best
denise laugesen
#1 Producing Agent
Cashin Company
650-465-5742 cell
650-403-6225 direct
Email: deniselaugesen@comcast.net
Web: http://www.deniselaugesenteam.com
Web: http://www.SFPeninsulaHomes.com
DRE: 01011089
1 vote
It was best for you too because you got more of a commission.
Flag Sat Oct 13, 2012
Naira Khnkoy…, Agent, Glendale, CA
Sun Jan 4, 2015
If your Realtor is also the seller’s agent, then it would be unethical to disclose what the other offer is. If your Realtor only represents you, then they would be aware of other offers but not the specifics. Best of luck.
0 votes
tombstone4x4, Home Owner, 65745
Sun Jan 4, 2015
In MO. I bought a house and they did not tell me there was a fire in the house was that wrong . or did I do something wrong . can this matter be fixed by a lawyer or what do I need to do.
0 votes
Grace Hanamo…, Agent, Cupertino, CA
Thu Jan 28, 2010
Hello Billy and thanks for your update.

Unfortunately, as you already know, disclosing the prices to other buyers or their agents is perfectly legal in California unless the homeowner specifies that they would prefer it not be done. However, as you noted, the practice of disclosure should be equal and handled in the same manner from buyer to buyer--not just to one buyer with the hopes of obtaining a dual agency deal. The listing agent in your deal should certainly have said, as the Saratoga listing agent told me in my example below, "I will tell you the highest price being offered by another buyer, and you can check back with me in a few days if you want an update." This way, it was not selective--any legitimate offeror could know the current "high price" on that home.

However, are you absolutely certain that the listing agent provided the other buyers with the knowledge of your offering price?

Certainly the listing agent has every right--and an obligation--to help the seller find a buyer (even his own client buyer) with a higher offer for the home, if possible. I've seen listing agents show a home to a buyer, and to let them know that there is only "one offer on the property now..." and have a buyer get so excited (especially if they've been looking for a while) that they offer a much higher price. In this instance, there is nothing illegal or unethical about this--no prices were discussed, and the buyer made a decision to offer a price based on his/her own judgment. The only time disclosure, in my opinion, needs to be made to you (as the first buyer) is when the second buyer learns of the price of your offer. In other words, equal treatment for all buyers. Again, as in my example below, disclosure of the prices by the Saratoga agent only helped (not hurt) his ability to obtain for his sellers the best possible price for their home.

I think its unfortunate that you were unable to purchase the home, but, it very may have been (play devil's advocate) that the listing agent did nothing more than show a home meeting a client's needs and tell him or her that if they wanted to put in an offer, they might get it because there is only one offer right now. Again, under those circumstances, no harm, no foul.

Let's hope you can find a better home in the very near future! Good luck!

Grace Morioka, SRES
Area Pro Realty
San Jose, CA

P. S. I was NEVER criticizing your agent, Billy--and in my over 800 responses on this site, I never do. I was simply stating that if you did not have an agent and used one it might have helped avoid this situation. Obviously, as the facts will out, if another buyer comes along, it can certainly cause the winds to change an a home to go to someone else. It will be better next time!
0 votes
Billy B., Home Buyer, Burlingame, CA
Thu Jan 28, 2010
Wow didn't think this scenario would inspire this much dialogue . . .

For the record, we did have an agent. The agent was savvy enough to not communicate the verbal acceptance. In fact, we only learned of this after he was unable to secure the signature and the listing agent disclosed he was representing another set of buyers on an offer. Quite honestly the listing agent has a reputation for being shady in any case so we were on notice.

But these facts aren't that important to the main question . . . which is around the norm of disclosing offers to other buyers in a equal versus selective fashion . . . I'll take my answer off the air;)
0 votes
Vicki Moore, Agent, San Carlos, CA
Thu Jan 28, 2010
No offense taken, Grace. I'm making my opinion heard, just as you have done.

Although we can't take a verbal agreement as fact in a real estate purchase, I think we would all like to take people at their word, which may be the situation here. But we don't know, do we? We haven't heard from all sides. I think it's harsh to criticize an agent when we not only don't know who it is but don't know the circumstances or the whole story.

Contrary to what the NAR would like the consumer to believe, we are not all the same.
0 votes
Grace Hanamo…, Agent, Cupertino, CA
Thu Jan 28, 2010
Hello Vicki:

Thanks for your note, and I think you misinterpreted my remarks. In fact, as the others have noted also, it is our belief that perhaps Billy attempted to purchase this home from the listing agent and without his own professional real estate representation, and this (not any insinuation as to the quality of character of any Realtor helping Billy) was the reason for my final comment.

But, you bring up a very good point ("the Realtor had no way knowing this circumstance would occur"), and, here, I have to disagree with you. The California Statutue of Frauds very clearly defines what types of agreements or arrangements must be memorialized (written) in order to be enforceable, and one of those agreements is the purchase or sale of real property--it is one of the first things one learns in preparing for the real estate exam. Certainly, no licensed Realtor that you or I know would have told a client that he/she had just purchased the home without an executed/signed purchase agreement. While the verbal "you got it" from the seller or the listing agent would be fabulous news, I'm sure both of us would have told Billy, "well, it looks like they say they'll sign it, but until we have that signed contract, we don't quite have the sale just yet..but stand by, I'm working to get that for you." And, I'm also sure that we both know that until there's ink at the bottom of the offer, there is "no contract" and no obligation to sell the home to our buyer.

I understand that you've taken offense at the comments of my earlier post, and I hope you won't take offense now, but if the buyer were using a Realtor as qualified as you or I or, for that matter, any of our colleagues listed below--and I've read all of their past answers on this site and can attest that they know their business well (I'd refer clients to them in a heartbeat), none of us would have made the mistake that led to a situation that has now harmed our client, Billy B.

Again, I hope you do not misinterpret my comments. My goal here on Trulia is to help the questionner, and, if possible, to caution or advise anyone reading my comments that an outcome might just have been different with help from a professional--a real estate agent or Realtor. Okay?

Sincerely,
Grace Morioka, SRES
Area Pro Realty
San Jose, CA
0 votes
Henri And Je…, Agent, Doylestown, PA
Thu Jan 28, 2010
As other agents reponded, the key part of this question is the verbal response. It does vary by state, but the majority of the states do enforce contracts, and Real Estate contracts must be in wrighting. at least in the State of PA that is how we do it. Sellers and savy listing agents love multiple offer scenarios. When there is more that one interedted party for the same propertiy. Sellers do need to give written permission to their agent as to how to proceede about the disclosure of another party or not.
0 votes
Vicki Moore, Agent, San Carlos, CA
Thu Jan 28, 2010
Grace - I don't think it's fair to insinuate that Billy's agent did anything wrong and that he should be "working with a qualified Realtor to help you and to avoid a similar situation occuring in the future." His agent had no way of knowing this circumstance would occur.
0 votes
Grace Hanamo…, Agent, Cupertino, CA
Tue Jan 26, 2010
Hello Billy and thanks for your post.

You are certainly correct that, in California, it is acceptable to disclose bids to those who ask UNLESS the Seller instructs the listing agent not to do so. "Confidentiality" of the offering price is a common misconception of many practicing real estate licensees, and while most eschew disclosing the prices (I always ask, but am not always given any information), there are many times and many circumstances under which disclosure is a great idea. In fact, I would advocate that, especially now when home sales are sluggish, it makes sense to disclose prices.

The terrible truth about home buying is that there will always be two types of home buyers; 1) those who want the best house, but want only a "bargain," and 2) those who want YOUR house. Over time, the buyers in the first category become the buyers of the second category if they cannot find the perfect home in their price range or are continually being "beaten out" by other more aggressive buyers. In other words, buyer frustration often breeds buyer realization of the true "cost" of buying. The second corollary of home selling is that your home will sell for a "market" price, which is determined by the buying public. The Seller, can certainly counter any offer that he/she feels is too low, but, ultimately, it is the buying public that creates the "market" price for any home. If the Seller doesn't like the prices offered, then the Seller does not need to sell the home--simple as that!

Now, here's the real estate "new think"--there is no reason, in my mind, that the first and second rules of home buying cannot work together to maximize the price for the seller while ensuring that a truly desirous buyer gets the home they want; and the way to achieve this is by DISCLOSING the prices offered to all buyers who ask.

Now, certainly, there will be buyers who deem the home "too expensive, " and walk away when they find out the price, but these same buyers never would have offered more anyway. Then there are those who really want that one home, and they'll start low, but will keep escalating as they know the price and what they can afford. As a buyer's agent, I cannot tell you how many times, my buyer's lower offer was declined when I knew that my buyer would gladly have paid $100,000 or $200,000 more for the same property. They just needed to know the prices.

Here's a good, real life example...I once represented a home buyer who wanted to purchase in Saratoga, California. The list price of the home was $1.8 milion (a lot of money), but there were quite a few interested buyers. The listing agent told ALL of us the price of the highest offer made, and, in the end, the three couples who wanted the property the most really fought for the home, and the couple who purchased the home and who really, really, really, really loved the property consented to pay more than $2.2 million or $400K more for the property. Had the prices not been disclosed, I'm pretty certain that the home would not have sold for $2.2 million, but for much less. So, as you can see, disclosing pricing tends to level the playing field and encourage more "realistic" pricing of the home, not the other way around. And, of course, the Seller is ALWAYS in control, so if the prices are too low, the home is simply withdrawn from the market.

Perhaps this will encourage other real estate professionals to consider disclosing, rather than withholding, pricing to obtain the best prices for their sellers. By the by, in the future, I would sincerely recommend working with a qualified Realtor to help you and to avoid a similar situation occuring in the future.

Good luck!!

Sincerely,
Grace Morioka, SRES, Realtor and Facilitator
Area Pro Realty-People's Choice
0 votes
Steven Ornel…, Agent, Fremont, CA
Sat Jan 23, 2010
Arn's post below triggered another point concerning the CAR Statewide Buyer and Seller Advisory (SBSA), in particular, Paragraph 29 which 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. 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."

So, if you want confidentiality, it certainly must be in writing.

Best, Steve
0 votes
Arn Cenedella, Agent, Greenville, SC
Sat Jan 23, 2010
Billy B

good research.
yes a buyer can present an offer with instructions not to disclose to other buyers.
of course, the seller does not have to agree to this provision and a buyer then can refuse to present their offer.
but if the buyer wants to buy the house they will usually make the offer whether or not seller will keep offer confidential.

Arn
0 votes
Billy B., Home Buyer, Burlingame, CA
Sat Jan 23, 2010
Thanks for the responses. First off I'm all for seller's maximizing the value of their property (I hope to be there one day too!) and I am learning folks have different norms in acheiving that objective.

For you buyers out there I also learned that while many listing brokers may consider disclosing Buyer A's offer to Buyer B bad business practice, it's not unethical or illegal according to the California Association of Realtors (see link). Thus it is fair game to use it as a tool to maximize value (although this may not be the case if one buyer is getting more information than the other).

So bottom line is unless you have a confidentiality agreement, the listing agent *can* disclose your offer (and may) to another buyer. In my situation it probably would not have helped since the listing agent also represented the buyers that won . . . se la vie
0 votes
Arn Cenedella, Agent, Greenville, SC
Sat Jan 23, 2010
Hi Billy
Sorry to hear about your situation.
Rule #1 in real estate is that contracts need to be in WRITING.
VERBAL means nothing.
The agent has no power either verbally or in writing to accept any offer.
Often in transactions, there is verbal communication - but I always caution my clients to not celebrate until everything is signed.
In this situation the more ethicial way of proceeding would have been for listing agent to contact your agent and you to inform you another offer has come in and allow you time to increase your offer if you wanted to.
It appears the listing agent did not handle it this way. It appears he wrote offer had it accepted by sellers in writing and then informed you of the other offer.
You were not treated fairly.
Agents can conduct business in ways where they treat everyone fairly but still try to do the best for their clients.

This may help put things in perspective.
If you were the seller in this situation, what would you have done? Would you have stayed with the lower offer that you or your agent verbally accepted or would you have taken the higher offer?
0 votes
Mack McCoy, Agent, Seattle, WA
Sat Jan 23, 2010
The listing agent represents the Seller, and as such, can certainly shop your offer around looking for someone to beat it. It's not a common practice, because, usually, there aren't that many people clamoring for a property.

I think you might ask yourself, if you were the Seller, and you told Your Agent, "Yeah, I'll take Billy B's offer, let's get together to sign that in a coupla days," and your agent found a better offer in the meantime . . . what would you do?
0 votes
Steven Ornel…, Agent, Fremont, CA
Sat Jan 23, 2010
Hi Billy,

It sure sounds like you were never a Client of the Listing Agent, just a customer. Did you sign an Agency Disclosure and/or a Dual Agency Disclosure? If you did not establish agency then the Listing agent had no fiduciary duties owed to you; however, this same agent DID have these duties to the Seller, one of which being full disclosure (like what you were willing to offer).

What you should do is scratch this up to experience. If you are serious about a purchase team up with a Real Estate professional and get set-up with an automated MLS Search Agent. However, you should be aware that a MLS Search Agent is not your first step. The first step should be a formal Pre-Approval - not a Pre-Qualification! To tell the differences see: http://www.Steven-Anthony.com/default.aspx?pp=39377

In regards to finding a Realtor, each Agent's website will likely list accreditations and client testimonials. These sites, as well as a review of their Trulia answers will give you good insight into the depth of knowledge and experience of each individual.

Note that DRE licensees are NOT bound to a Code of Ethics; only Realtors take that oath, which can be viewed here: http://docs.Steven-Anthony.com/RealtorCOE.pdf

You can check to make sure an Agent is a Realtor by going here:
http://www.realtor.org/rofindrealtor.nsf/pages/FS_FREALTOR?O…

Additionally, you can check for Agent DRE violations here:
http://www2.dre.ca.gov/PublicASP/pplinfo.asp

While not required to receive excellent representation, consider searching for a Realtor who is also an Accredited Buyers Representative here: http://www.rebac.net/MembershipDirectorySearch.aspx

Best, Steve
0 votes
Anna M Brocco, Agent, Williston Park, NY
Sat Jan 23, 2010
The listing agent should not be accepting any offers for the sellers-- unless he/she has written permission to do so--the agent can say that there is another offer, however not the actual number. What is your agent advising you do--you can always report the agent's actions to the local Realty Board and take it from there.
0 votes
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