Escalation Addenda and Sharing Competing Offers

QUESTION: Escalation addenda are everywhere right now! The forms I’ve seen have some small differences, but one thing they all demand is that the seller provide a copy of the highest competing offer to the successful buyer in order to show that the final purchase price is justified. As a listing agent, can I share a competing offer after the seller has gone under contract?

ANSWER: As a general rule, the sharing of a competing offer is not permitted under the License Law. Rule 58A.0115 prohibits brokers from shopping offers, and states that a “broker shall not disclose the price or other material terms contained in a party’s offer to purchase, sell, lease, rent, or to option real property to a competing party without the express authority of the offering party.”

In the situation you describe, a listing agent could argue that they’re not disclosing the competing offer for the purpose of “shopping” under the rule. Once the contract is signed, the listing agent could contend that the prohibition on disclosing a competing offer no longer applies, and that the competing offer is only being provided in order to confirm the final purchase price.

That said, the Real Estate Commission could take the position that the competing offer is being disclosed without the offeror’s consent in order to get the seller a better deal. Rule .0115 is not clear as to when a party ceases to be a “competing party.” Under this reasoning, it is possible that a listing agent’s disclosure of a competing offer to a successful buyer could violate the rule, even though the seller is already under contract.

It is because of these competing arguments that a broker should tell their seller-client that if they accept an offer with an escalation addendum, the broker may not be able to provide any competing offers to the successful buyer. Agents are also reminded that they should strongly advise their sellers to seek legal advice if they receive an offer with an escalation addendum. To read further guidance on escalation addenda, please read our archived Q&As, located here and here on our website.

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