Can A Listing Agent Disclose Our Offer To Another Buyer?


Our house buying neighbor is similar to the majority of house hunters. They would prefer the details of their own offer to buy a property to remain confidential. Shared between only them, the seller, and their agents. On the other hand, I have had to listen to that same neighbor complain bitterly when a seller’s agent won’t reveal the details of another person’s bid.  In order to head of another ran about shady agents, I decided to look into the rules around sharing proposals and what an agent can do in the event of receiving more than one offer.

Can A Listing Agent Disclose Our Offer To Another Buyer? Listing agents are under a legal and ethical obligation to do the best for their client, the seller. If that involves disclosing your offer to another buyer, they can do so. There are three exceptions. 1) If the buyer and seller enter into a confidentiality agreement. 2) If the laws or real estate regulations of the state in which a transaction is taking place say otherwise. 3) If the agent is instructed by the seller not to disclose offers.

So under what circumstances can a real estate agent keep offers secret, reveal that there are other offers, or even share the details of other offers with potential buyers? What are the legal and ethical issues around sharing the specifics of someone else’s bid? How can the choice to share, or not share impact the sale? Discover the answers to these questions and many more. I will reveal everything I’ve learned about the complexities of offer disclosure in the often cut-throat world of real estate.

Can A Listing Agent Disclose Our Offer To Another Buyer?


A buyer is usually suspicious when they hear “there is already an offer” or something similar from a sellers agent. We’re often predisposed to be skeptical about such statements, suspicious that the agent is trying to panic us into placing our highest bid. If you ask for the details of the other offer and are told “I can’t disclose them” this reinforces the impression that there is no competing bid and it’s all a ruse to make you pay more for the property.

The general feeling is that it’s “only fair” a sellers agent shares the details of other bids. After all, as a buyer, you do not want to pay more than you have to. The flip side of this is that buyers do not want a sellers agent to share the details of their own offer. Understandably, they do not want to give other house-hunters the information they need to formulate a winning bid.

The bottom line is that the seller’s agent has a duty to get the best possible deal for their client. If doing so involves disclosing the details of another buyers bid, they will. In fact, you could argue that, unless there are specific reasons in play why an agent cannot disclose an offer, they are duty-bound to do so.

Are There Laws About Disclosing Our Offer To Another Buyer?

There are different types of law that govern real estate. Some are specific to real estate, while others have implications for property transactions and ownership. For example, the FAA sets the heights at which planes can fly over private property and states that property owners cannot do anything to interfere with a planes clear passage.

These laws are in place at a Federal, State, and Local level and are:

  • Regulatory – This means they are enacted by a government administrative agency.
  • Statutory – These are enacted by a legislative body
  • Common Law – Legislation which has evolved from decisions by the courts.

My research found that some states have legislation that prohibits an offer from being disclosed to other buyers. However, in the vast majority of the country, there is nothing illegal about telling one buyer what another has offered.

Is It Ethical To Disclose Our Offer To Another Buyer?

The ethics around real estate transactions have a number of different layers to them. First are the basic ethics around decency, honesty, and fairness to which you could reasonably expect all real estate agents to stick to. These are the unwritten rules that boil down to “Treat other people how you would want to be treated yourself.”

The good news is that you do not have to rely entirely on your real estate agents basic human decency. When you sign on with either a listing agent or a buyers agent, you are entering into a contract which spells out the fiduciary duty of both parties.

A fiduciary duty is a legal obligation for one party in the contract to act in the best interests of the other party. So, in the case of signing up with a real estate agent, your agent is legally obliged to do what’s in your best interests. The only exception to this is when an agent advises a client to do one thing and the client disagrees and instructs the agent to do something else.

When It Can Get Murky

The listing agent owes a fiduciary duty to the seller. They are legally bound to promote the interests of the seller, usually by getting the highest price, although not always. Sometimes other aspects of an offer, such as a quick closing date or a cash buyer with no financing to negotiate are worth more to the seller than straight-up dollar amounts.

The buyers’ agent is duty bound to get the best deal possible for their client, which again is usually the lowest price possible but also involves other terms and conditions of the offer. The difference with buyers agents is that they often have a number of buyers for whom they provide representation, some of which may be interested in the same properties in which you are interested.

This can cause a problem.

How does a buyer’s agent put the interests of ALL of their clients first when multiple buyer clients are interested in the same property? For this reason, it is important to ask your broker how offers and possibly counter offers will be handled if they have more than one client who wants to buy the same house.

The solution is easier in larger brokerages where it is possible to ask that each buyer interested in a property is represented by a different agent. If you are sharing an agent with other interested buyers, you will just have to put your faith in your agents’ integrity.

Murky Listing Agent Practices

A listing agent may also have several buyer clients, some of whom might also be interested in your dream home. It is considered unethical for an agent to use their position as the listing agent to “shop” for offers among their own buyer clients. This is especially true if the agent is attempting to drive up the price for personal gain.

Even without driving up the price by a great deal, if the listing agent is also representing the buyer, then the agent can increase the seller’s net proceeds by cutting back the listing agent’s percentage of the commission. This way it is still to the listing agents’ advantage to sell to their own buyer, with a reduced commission, than it is to sell to you and split the commission with your agent.

On other occasions, the listing agent might have what is sometimes referred to as a “pocket buyer.” This person will have instructed the sellers’ agent to call if a better offer than their own is submitted. As a consequence, the pocket buyer will always be able to submit a better offer than your own.

It doesn’t have to be all about the money either. A listing agent can exert undue influence over their clients choice of a buyer in other ways. For example, the real estate agent can paint a rosy picture of their own buyers’ financial position and ability to complete the sale while portraying you as a risky, unknown quantity.

Because of these possibilities, if you have submitted an offer that is superseded by an offer from another buyer, it is important for your agent to ask the listing agent directly if that offer is from someone represented by the listing agent.

Some agents also advise their buyers to write a personal letter to submit with their offer, in which they can outline a little about their desire and ability to purchase the home.

If You Have A REALTOR®

If your real estate agent is a member of the National Association of REALTORS®, they are bound by a code of ethics to which they must adhere, or they can lose their membership and the right to use the REALTOR® title and symbol. This code of ethics states that:

“REALTORS® pledge themselves to protect and promote the interests of their client.”

Although this is specifically written into the code of ethics, it also says, later in the code that this obligation to their client does not relieve the REALTOR® of their responsibility to treat all parties honestly.

This point applies generally, to all areas of the property transaction process. However, there are additional points that deal explicitly with the disclosure of an offer to other buyers. It says that as long as they have the sellers permission, REALTORS® should if they are asked by buyers or other brokers, disclose the existence of other offers.

So, to reiterate, if you are dealing with a REALTOR®  they are under an obligation to be as open and honest as they can with all parties and this includes sharing the existence of offers. If the real estate agent or broker you are dealing with is not a REALTOR® it is still considered ethically sound to disclose the existence of an offer with another buyer.

There is, however, always a “BUT.”

In this case, the “BUT”  is the fact that the existence of your offer can be disclosed to another buyer but there are no hard and fast rules about whether or not a listing agent can share the details of your offer to another buyer.

What Are The Implications Of Disclosing Our Offer To Another Buyer?

There are several different scenarios in which a listing agent might or might not share an offer. Each situation has different implications for the seller, the potential buyers, and the integrity of the sales process.

  1. The Listing Agent Shares The Details Of All Offers To All Potential Buyers. Let’s assume that in this scenario all buyers are treated equally and have an equal opportunity to change their own offer. This can result in:
    1. A long drawn out bidding war in which buyers are constantly upping the stakes until the seller finally chooses the “best” offer.
    2. A deadline being placed on offers with each buyer being asked to submit their best offer by a certain date. The seller then views all offers and choose the one that works best for them.
    3. Some buyers might walk away, leaving just one offer left on the table.
    4. All buyers walk away and the seller is left with no options.
  2. The Listing Agent Discloses The Details Of All Offers To Some Buyers. This has the same results as possibility #1 except those that have the information are at an unfair advantage over those that do not.
  3. The Listing Agent Shares The Details Of Some Other Offers To All Or Some Of The Buyers. This has the same implications as point #2.
  4. The Listing Agent Shares That There Are Offers But Doesn’t Supply Details. In this case, some buyers may be suspicious about the truthfulness of this statement and walk away. Meanwhile, others may unnecessarily up their bids.
  5. The List Agent Does Not Disclose Anything. Everyone is in the dark and once the home is sold, buyers tend to feel higher levels of frustration and unhappiness because they were not given an option to “fight” for the house.

So, you can see, every choice has the potential to upset somebody. As a result, there are no cut and dry rules about whether or not a listing agent can disclose your offer to another buyer.

Unless.

There are some times when a real estate agent cannot disclose your offer to another buyer.

1) If the buyer and seller enter into a confidentiality agreement.

There is nothing to prevent a buyer from asking for the seller and their agent to enter into a confidentiality agreement. By signing this document, all parties agree that the existence of, or details of your offer, will not be disclosed.

However, this is entirely reliant on the seller agreeing to sign such an agreement and they are under no obligation to do so. It is especially unlikely they will sign a confidentiality agreement when their home is expected to receive multiple offers. Why should they agree to keep your offer secret when they have plenty of other offers which they can use to drive up the price?

2) If the laws or real estate regulations of the state in which a transaction is taking place say otherwise.

In some states there are laws or regulations which prevent a seller or their agent, disclosing an offer to another buyer. Depending on the local rules the agent may be able to say there is an offer, but would not be allowed to say any more than that. So, for example:

If a buyers agent calls the listing agent and asks if there are offers the listing agent can say yes. However, if the listing agent is asked “Is it worth putting in an offer of $275,000?” they cannot reply yes or no as that might give away the bid price in the existing offer.

The most a seller’s agent would be able to say is something along the lines of “Write your offer and I will present it to my client and let you know.”

3) If the agent is instructed by the seller not to disclose offers.

Ultimately, an agent is honor bound to carry out any lawful instruction by their client. Therefore if a client instructs the listing agent to disclose or not disclose offers, and there is no legislation in place to override this instruction, the agent must follow their clients’ instruction.

This can lead to an agent having to be untruthful when asked about other offers, or having to disclose the details of your offer to the other interested house hunters.

What Can You Do If Your Offer Is Disclosed To Another Buyer?

If a listing agent discloses an offer to another buyer and in doing so breaks the law or a confidentiality agreement, then you would have legal redress.

However, if no laws have been broken, then there is little you can do except decide whether or not you wish to continue trying to buy the home or walk away and look for something else.

About The Author

Geoff Southworth is the creator of RealEstateInfoGuide.com, the site that helps new homeowners, investors, and homeowners-to-be successfully navigate the complex world of property ownership. Geoff is a real estate investor of 8 years has had experience as a manager of a debt-free, private real estate equity fund, as well as a Registered Nurse in Emergency Trauma and Cardiac Cath Lab Care. As a result, he has developed a unique “people first, business second” approach to real estate.

Check out the Full Author Biography here.

 

This article has been reviewed by our editorial board and has been approved for publication in accordance with our editorial policy.

Geoff

Geoff Southworth is the creator of RealEstateInfoGuide.com, the site that helps new homeowners, investors, and homeowners-to-be successfully navigate the complex world of property ownership. Geoff is a real estate investor of 8 years has had experience as a manager of a debt-free, private real estate equity fund, as well as a Registered Nurse in Emergency Trauma and Cardiac Cath Lab Care. As a result, he has developed a unique “people first, business second” approach to real estate.

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