Legislation Proposed – Contemporaneous Offers
One unforeseeable consequence of a seller’s market is a question about an agent’s duty when they represent competing purchasers on a listing. Legislation pending before the Ohio legislature seeks to provide guidance to agents when presenting contemporaneous offers on behalf of their buyer clients.
As with every legislative proposal, there is a back story. Current law provides that a licensee does not breach a duty or obligation to the purchaser by showing the same property (that the purchaser is interested in) to other purchasers. However, the Canons of Ethics for the Real Estate Industry, promulgated by the Ohio Real Estate Commission, provides that a licensee should not enter into an agency relationship with a party whose interests are in conflict with those of the licensee or another client represented by the licensee, without fully disclosing the potential conflict and obtaining the informed consent of all parties.
Let’s break this down. So we know that the law allows an agent to show the same property to multiple buyers and that by doing so the agent isn’t breaching any duties to the agent’s respective buyer clients. We also know that there may become a time where one buyer client’s interests conflict with the agent’s other buyer client — likely when both have asked the agent to prepare offers for the same property. When this occurs, the Canons of Ethics requires agents to “fully disclose the potential conflict” and obtain the “informed consent of all parties.” However, isn’t the fact that you’re representing another buyer on a property confidential information? Will the disclosure to one or both prejudice their respective chances of getting the property? Will agents steer clients to alternate properties to avoid a conflict?
The proposed law creates a term “contemporaneous offer” which is defined as offers to purchase on behalf of two or more clients represented by the same agent for the same property, which the agent believes will be considered by the owner during the same period of time. The law requires that prior to preparing a contemporaneous offer, the agent must disclose the fact in writing to all clients and refer the client to another agent upon request. The law also provides that the disclosure of the existence of contemporaneous offer does not breach an agent’s duty of confidentiality to the respective clients.
The proposal is consumer friendly, in that buyers shouldn’t find out after the fact that their agent, whom they’ve shared confidential information, was also representing a competing buyer for a chosen home. I expect the legislation if enacted will not resolve the issue completely, as questions are likely to be raised about how to specifically implement the proposed changes. However, I do believe the clarification is warranted, in that it provides meaningful guidance to licensees navigating a hot competitive seller’s market.