Entering the second month of a new year provides a great opportunity for a risk reduction reminder regarding your duty of confidentiality. The duty of confidentiality applies to all parties to a transaction and survives the transaction. 

As REALTORS^®, you have the duty to preserve confidential information under Wis. Stat. § 452.133(1)(d) and Standard of Practice 1-9 of the REALTOR^® Code of Ethics. Further, Wis. Admin. Code § REEB 24.12(1) disallows a licensee from disclosing any of the terms of one prospective buyer’s written proposal to any other prospective buyer or any person with the intent that information would be disclosed to any other prospective buyer. 

For the sake of review, this article runs through two specific concerns relating to confidentiality. 

Terms of another offer

With a busier real estate market, agents are often challenged by buyers, and sometimes the buyers’ agent or the buyers’ attorney, to find out another buyer’s terms or terms of an accepted offer so the agents can write a more competitive offer. This becomes very tricky for the listing agent because real estate licensees cannot disclose the terms of one buyer’s offer to another buyer. 

So if buyers, their agent — who shouldn’t be asking, or their attorney asks you, “What is their purchase price? Do they have a financing contingency? When is closing? How many hours is the bump clause?” You cannot answer their questions. 

This is true even if the seller directs the listing agent to disclose the terms — remember the seller is not the only party to that offer; in order for a listing agent to disclose the terms of an offer, both the buyers and the sellers of that offer would have to provide permission to disclose the terms. If this did occur, the agent would be advised to document this permission.

A situation in which the seller directs the listing agent to disclose the first buyer’s offer terms to the agent representing another buyer would be a violation of the duty of confidentiality to the first buyer. The buyer expects his offer terms to be confidential. With the seller’s permission, the listing agent may disclose the existence of the offer and the fact there is a bump clause, per the Wisconsin Administrative Code rules. See the Wis. Admin. Code § REEB 24.12(1) Confidentiality of Offers in the box on page 16.

Real estate licensees don’t have to be silent on all matters — if it’s true, agents may disclose the following:

1. There is/are other offer(s).
2. There is an accepted offer. 
3. There is an accepted offer with contingencies. 
4. There is an accepted offer with a bump.

See Wis. Admin. Code § REEB 24.12(1). 

Real estate licensees can disclose some things but not everything. For illustration, while agents can tell you there are other offers or an accepted offer, they cannot disclose the terms of those offers. However, there is a little wiggle room: they can tell you whether there are contingencies, including if there is a bump, but they cannot disclose any further information such as the bump clause is 24 hours or offer No. 1 has an inspection and financing contingency.

Sellers compared to licensees

All parties should understand that the disclosure duty of the listing agent is independent from the seller’s disclosure duty. Each licensee engaging in real estate practice has a duty to inspect the property and make appropriate disclosures. Information about the property can come from sources other than the licensee’s observation of the property, such as home inspection or engineering reports or even from the seller. 

For instance, let’s say the seller was considering finishing the basement, rather than selling. Therefore, the seller sought a contractor for a quote. The contractor noted a concern about tiles that potentially contained asbestos and informed the seller that he would not move forward with the remodel until the seller confirmed whether the tiles contained asbestos. The seller had a professional asbestos company visit the property, and the company confirmed the tiles contained asbestos and provided the seller an estimate of the cost for addressing the asbestos. The seller then decided to sell the house instead of dealing with the asbestos. The seller contacted the listing agent, told the agent the asbestos story, and finally told the listing agent not to disclose the fact of asbestos in the home. 

Wis. Admin. Code § REEB 24.07 provides that licensees are practicing competently when they disclose information that suggests possible or known material adverse facts. The relevant portion of Wis. Admin. Code § REEB 24.07 is included in the box on page 16. 

The fact that a licensee knows there is asbestos in the home is a known material adverse fact. If the seller does not disclose this fact to prospective buyers, then the licensee would be required to do so. This situation is a perfect example of where an agent should reach out to his or her supervising broker to discuss what occurred. 

A licensee’s obligation to clients and customers requires disclosure of material adverse facts, regardless of the directive of the client or customer. Although the sellers may request that certain information remain confidential, the license law obligation to disclose trumps any such directive.

A sample of the WRA’s material adverse fact disclosure (WRA-DMAF) letter is available in zipForm. 

If you are ever unsure whether you should or should not disclose something, discuss the situation with your supervising broker.

Wis. Admin. Code § 24.12 Confidentiality of offers. 

(1)  Except as provided in sub. (2), a licensee acting as a principal or an agent in a real estate or business opportunity transaction shall not disclose any of the terms of one prospective buyer’s offer to purchase, exchange agreement or option contract proposal to any other prospective buyer or to any person with the intent that this information be disclosed to any other prospective buyer. Licensees shall encourage all prospective buyers to submit their best offers. A licensee may, but is not required to, disclose information known by the licensee regarding the existence of other offers on the property, the fact that a seller has accepted an offer, that the offer is subject to contingencies and that the offer is subject to a clause requiring removal of certain contingencies upon the occurrence of an event such as receipt, acceptance or conditional acceptance of another offer.

Wis. Admin. Code § 24 REEB 24.07 Inspection and disclosure duties. 

(2)  Disclosure of material adverse facts. A licensee may not exaggerate or misrepresent facts in the practice of real estate. A licensee, when engaging in real estate practice, shall disclose to each party, in writing and in a timely fashion, all material adverse facts that the licensee knows and that the party does not know or cannot discover through a reasonably vigilant observation, unless the disclosure of the material adverse fact is prohibited by law. This provision is not limited to the condition of the property, but includes other material adverse facts in the transaction.

Note: Certain “material adverse facts”, as defined in s. REEB 24.02 (12), may not be disclosed by law. For example, unless specifically authorized by a seller, a licensee may not disclose to a potential buyer the actual minimum sales price the seller will accept. See s. 452.133 (1) (d), Stats.

(3)  Disclosure of information suggesting material adverse facts. A licensee, when engaging in real estate practice, who becomes aware of information suggesting the possibility of material adverse facts to the transaction, shall be practicing competently if the licensee discloses to the parties the information suggesting the possibility of material adverse facts to the transaction in writing and in a timely fashion, recommends the parties obtain expert assistance to inspect or investigate for possible material adverse facts to the transaction, and, if directed by the parties, drafts appropriate inspection or investigation contingencies. This provision is not limited to the condition of the property, but includes other material adverse facts to the transaction, including but not limited to defects and conditions included within the report form under ss. 703.33 and 709.03, Stats. A licensee is not required to retain third party inspectors or investigators to perform investigations of information suggesting the possibility of a material adverse fact to the transaction.

Cori Lamont is Director of Corporate and Regulatory Affairs for the WRA.