Wisconsin Administrative Code § RL 24.12(1) 

“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.”

The following questions have been recently submitted to the Wisconsin REALTORS^® Association in regards to confidentiality.

Distribution of information

Given that the duty of confidentiality extends beyond closing, how can a broker report sales concessions and sold information to the MLS or help appraisers asking for comparable sales? 

REALTORS^® 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. Due to confidentiality concerns, brokers cannot assist appraisers and others requesting information about concessions in transactions. However, confidentiality is not a concern if the parties authorize the release of sales and concession information. Fortunately the 2010 WB-11 Residential Offer to Purchase now includes the Distribution of Information section at lines 275-280. The Distribution of Information provisions provide written authorization from the parties to the licensees in the transaction to share three categories of information with the MLS, appraisers and other settlement service providers: 1) copies of the accepted offer; 2) financing concessions and sold data; and 3) active listing, pending sales, seller concessions and assistance, and other information needed by appraisers researching comparable information under the increasing number of tougher appraisal standards.

DISTRIBUTION OF INFORMATION Buyer and Seller authorize the agents of Buyer and Seller to: (i) distribute copies of the Offer to Buyer’s lender, appraisers, title insurance companies and any other settlement service providers for the transaction as defined  bythe Real Estate Settlement Procedures Act (RESPA); (ii) report sales and financing concession data to multiple listing service sold databases; and (iii) provide active listing,pending sale, closed sale and financing concession information and data, and related information regarding seller contributions, incentives or assistance, and third party gifts, to appraisers researching comparable sales, market conditions and listings, upon inquiry.

Appraisals

The agent has a listing for which the seller had an accepted offer that was subject to appraisal. The appraised value was too low and the buyers decided not to purchase the property. The listing agent has a second potential buyer for the same home. Can the agent share the appraisal with the second buyer? 

It would be unwise for the listing agent to provide a copy of the appraisal report to the second buyer because it would be considered a confidential transaction document under Wis. Stat. § 452.133(1)(d). Standard of Practice 1-9 prohibits REALTORS^® from revealing a client’s confidential information or using it for the REALTORS^®’ advantage or the advantage of a third party without client consent after full disclosure. Both the REALTOR^® Code of Ethics and Wisconsin license law require brokers to maintain confidential information, even after the completion or the termination of a transaction. Moreover, the appraisal was prepared for a specific client (the first buyer or that buyer’s lender), and appraisals generally cannot simply be reassigned to a second buyer. For information about appraisals and appraisers, see the October 2004 Legal Update, “Appraisers and Appraisal Issues,” online at www.wra.org/LU0410.

Home inspection reports

The buyer had an accepted offer and the last hurdle was the inspection contingency. The home inspection was conducted and the home inspector found problems with the window seals and the furnace. The sellers claim they did not know about these problems. The buyer gave a notice of defects and the seller has no right to cure so the offer is null and void. Can the listing broker give the home inspection report to subsequent buyers? 

The offer to purchase requires that the buyer provide copies of all inspection reports to the seller and listing broker. According to the terms of the standard WB-11 Residential Offer to Purchase, the delivery of a notice of defects plus a copy of the inspection report in a contract where the seller does not have the right to cure causes the offer to become null and void. See lines 433-435 of the 2010 WB-11.

Per Wis. Stat. § 709.035, the sellers should amend the Real Estate Condition Report (RECR) when they become aware of information that would change a response before another offer to purchase is accepted. The sellers may amend the report by creating a new RECR or using an amendment to RECR and, in either instance, incorporate by reference a copy of the home inspector’s report. It is recommended that sellers complete the RECR amendment as soon as possible because if a completed RECR is given to the buyer before he or she submits an offer to purchase, there will be no Chapter 709 buyer rescission rights.

A real estate licensee who is aware of material adverse facts not otherwise disclosed to the parties or known by the parties must make timely written disclosure. A broker would not provide copies of inspection or contractor reports to meet such an obligation because of confidentiality restrictions in license law and the Code of Ethics.

Pending offers

Prior to setting a showing, a cooperating agent called the listing agent to inquire about any existing offers on the property. The property is REO (bank-owned) and the buyer wants this information before seeing the property. The listing agent said he could not reveal that information because the REO seller does not want pending offer information disclosed. Is this allowed? 

The Wisconsin Administrative Code and the Code of Ethics regulate the sharing of information about pending offers on a property. Wis. Admin. Code § RL 24.12(1) states, in relevant part, “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 another 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.” Therefore, if the seller has required the broker to keep any information about pending offers on the property confidential, the agent need not make this disclosure.

Standard of Practice 1-15 provides, “REALTORS^®, in response to inquiries from buyers or cooperating brokers shall, with the sellers’ approval, divulge the existence of offers on the property. Where disclosure is authorized, REALTORS^® shall also disclose, if asked, whether offers were obtained by the listing licensee, another licensee in the listing firm, or by a cooperating broker. (Adopted 1/03, Amended 1/09)” Therefore, with the seller’s approval and prior to the acceptance of an offer to purchase, the agent shall disclose information about other offers. If, however, the seller directs the agent not to disclose, as is the case here, the broker may document this fact and follow the instructions of the seller.

Accepted offers

The seller listed a property for a short sale. A primary offer has been accepted subject to lender approval. Is this an accepted offer, and does the broker have to disclose the accepted offer to cooperating brokers? Should another offer be submitted as primary or secondary? 

An offer to purchase is accepted when the buyer and seller have signed the offer and it has been delivered to create binding acceptance. The offer is subject to lender approval, which reflects an unresolved contingency of the accepted offer between the buyer and the seller. Standard of Practice 3-6 provides, “REALTORS^® shall disclose the existence of accepted offers, including offers with unresolved contingencies, to any broker seeking cooperation.”

Any subsequent offers should be accepted in secondary position to avoid multiple primary offers because it is very risky and ill-advised for a seller to accept more than one offer to purchase as a primary offer. Standard of Practice 1-7 provides in relevant part, “REALTORS^® shall recommend that sellers obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract ...” Clearly the safest practice from the seller’s standpoint is to make subsequent offers secondary offers — with each one also subject to the approval of the seller’s lender for a short sale. For further discussion of short sales, see the January 2008 Legal Update, “Short Sales – A Risky Business,” online at www.wra.org/LU0801.

Confidentiality agreements

The broker has a new commercial listing. The prospective buyers are asking for financial statements. The broker would like the buyers to sign a confidentiality agreement before releasing the financials. Does the Wisconsin REALTORS^® Association have some appropriate wording for a confidentiality agreement? 

There is no standard confidentiality agreement or language for use by real estate licensees. Drafting such an agreement would be the unauthorized practice of law. The seller may be referred to private legal counsel to draft a confidentiality agreement that meets the needs of the seller in his transaction, given his specific situation.

Tracy Rucka is a Staff Attorney for the WRA