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Can
Maryland REALTORS ® “Shop” Offers?
Effect
of NAR Code of Ethics Changes on Maryland Practitioners.
Three significant changes to the NAR Code of
Ethics became effective January 1, 2006. These changes have been the
subject of much discussion and interpretation. We offer the
following guidance.
First, Standard of Practice (SOP) 1-15 was
amended. Previously, SOP 1-15 provided that REALTORS ®, with the
seller’s consent and upon inquiries from buyers or cooperating
brokers, shall disclose the existence of offers on any listed
property. The new provision of SOP 1-15 now provides that where such
disclosure is authorized by the seller, REALTORS ® shall also
disclose whether the offers were obtained by the listing licensee,
another licensee in the listing firm, or by a cooperating broker.
Members are advised to
review and/or have their attorney review all Listing Agreements to
determine if they need to be amended to reflect the
change.
Second, SOP 1-13, in subparagraph 5, now
provides that when entering into buyer/tenant agreements, REALTORS ®
must advise potential clients of the possibility that sellers or
seller’s representatives may not treat the existence, terms, or
conditions or offers as confidential unless confidentiality is
required by law, regulation, or by any confidentiality agreement
between the parties. There seems to be some confusion as to the
substantive impact of this change. This is simply a notice
provision. This change, by itself, does not allow REALTORS ®
to “shop” offers. As more fully explained below, t he duty to treat
all parties fairly and honestly under Maryland law means that, for a
REALTOR ® representing the seller, the terms and conditions of an
offer are confidential for purposes of application of SOP 1-13.
Third, a new change appears on page 69 of
the 2006 NAR Code of Ethics and Arbitration Manual. It is in
Appendix IX (Presenting and Negotiating Multiple Offers) to Part
Four – The Ethics Hearing. The gray-shaded language, which appears
at the top of the left column on page 69, is all new. It appears
under a bullet point that reminds REALTORS ® of things to explain to
buyers when entering into buyer representation agreements.
This new language is nothing
more than a reminder that, according to NAR, real estate brokers
may, unless prohibited by law or regulation, “shop”
offers. Under Maryland law sellers, since they
are not bound by the real estate license law or the NAR Code of
Ethics, are certainly free to “shop” offers. I t is completely unsettled
under Maryland law whether a real estate licensee may “shop” offers.
This is a key issue since the new language of the NAR Code of Ethics
expressly conditions the rights of a REALTOR ® to “shop” offers on
the absence of a prohibition in law or regulation.
In the early 1980s the Maryland Real Estate
Commission discussed this matter informally at its monthly business
meeting. At that time, it was the position of the Commission that
the shopping of offers by a REALTOR ®, even where authorized by the
seller, in the opinion of the Commission as then constituted, would
be a violation of the real estate license law, which requires
licensees to treat all parties fairly and honestly.
There is nothing in the real estate license
law or the regulations as adopted by the Commission or the Code of
Ethics of the Maryland Real Estate Commission that is directly on
point in this matter. MAR is evaluating its options vis-ŕ-vis the
Maryland Real Estate Commission and the Maryland Attorney General’s
Office. It is foreseeable that the Commission would elect not to
offer a formal advisory opinion, and we cannot predict what the
Attorney General’s Office would conclude. Given this uncertainty,
MAR will proceed with caution and with no predetermined time frame
for resolution.
Unless and until such time as either the
Maryland Real Estate Commission or the Attorney General’s Office
provides a written opinion indicating that the shopping of offers by
real estate licensees is not prohibited by law or regulation, it is
MAR’s position that real estate licensees in Maryland may not shop
offers, even if requested by the seller to do
so.
Regarding the change to SOP 1-13, under
current Maryland law, a buyer is not the client of the listing agent
and the existence, terms and conditions of an offer made is not
confidential unless it is an
in-house transaction. In such instance, there
may well be a duty of confidentiality between both the licensee
acting as the buyer intra-company agent and the licensee acting as
the intra-company agent on behalf of the seller.
Current buyer agency agreement forms should
be amended to be consistent with the new NAR provision of SOP 1-13.
However, such disclosure should be limited to the fact that the
seller may not treat the existence, terms, or conditions of offers
as confidential. On the other hand, recalling the discussion of the
change on page 69, the duty to treat all parties fairly and honestly
under Maryland law means that, for a REALTOR ® representing the
seller, the terms and conditions of an offer are confidential for
purposes of application of SOP 1-13.
For more information and assistance, contact
Chuck Kasky or Don Martin—800-638-6425.
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