Proper handling of a multiple offer situation

QUESTION: I work in a market that has stayed pretty hot. I represent a buyer who recently made an offer on a listed property. The property ended up going under contract to another buyer (I’ll call her “Buyer 2”). I have learned that when the agent for Buyer 2 first contacted the listing agent, he asked if there were any other offers pending. The listing agent had already received our offer and answered yes. When the listing agent received Buyer 2’s offer, the listing agent did not tell me about that offer until the property was already under contract to Buyer 2. Should he have done so?

ANSWER: The answer is yes. In handling multiple offer situations, the guidance to listing agents from the North Carolina Real Estate Commission is, first and foremost, treat all potential buyers fairly and honestly. In the situation you have described, fairness requires that if Buyer 2 is made aware of the existence of a competing offer, Buyer 1 is also entitled to know if and when Buyer 2 submits a competing offer. Equal disclosure is needed so that all buyers can compete on a level playing field.

As a reminder, the existence of multiple offers is NOT a material fact that must be disclosed. If a buyer or buyer agent inquires about the existence of a competing offer, the REALTOR® Code of Ethics provides guidance. Specifically, Standard of Practice 1-15 states that, in response to such an inquiry, REALTORS® shall, with the seller’s approval, disclose the existence of offers on the property.

One feature of the situation you describe that is fairly common is the fact that when Buyer 2’s agent made his initial inquiry to the listing agent, there was only one offer outstanding – that of Buyer 1. In other words, it was not yet a true multiple offer situation. However, that fact does not change the listing agent’s responsibility. If a listing agent makes a seller-approved disclosure to Buyer 2’s agent, the subsequent receipt of an offer from Buyer 2 triggers the listing agent’s responsibility to disclose the fact of that offer to Buyer 1.

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