Brokers are typically generous with their time at this stage — they’re experts in the field, they love touring houses and talking about real estate, and they (of course) are hoping you’ll sign up with them and ultimately pay a chunky commission on the sale.
But I’m getting ahead of myself here. Things can get very chummy during these initial conversations, and you may even feel with each broker that, “This is the one.”
Better keep at least some cards close to your chest, however, as described by columnist Ken Harney in his intriguing and disturbing article, “Agents not obligated to keep secrets when they don’t get the listing.” If it weren’t for an April Fool’s joke played by a real estate broker — who pretended to have set up a website, “LostListings,” in which the unchosen masses of prospective brokers could sell information gleaned from those initial conversations — this topic might not have made it to anyone’s radar screen. The joke website suggested, for example, that brokers might reveal things like the seller’s desperation to unload the house quickly to avoid foreclosure, or defects the seller was hoping not to have to disclose.
Not everyone caught on to the joke, however. (That always happens!) And a conversation ensued along the lines of, “Okay, so how much can a broker who no longer has a direct relationship to the seller ethically reveal?”
For the brokers who ARE in contract to sell someone’s house, the answer is clear. They must maintain confidentiality, subject to any exceptions set out by state law. (In some states, for example, listing brokers must tell buyers about material defects within their knowledge that would not have been readily apparent to the buyer or an inspector.)
If I’d had to guess, I would have said that prospective brokers would also have a professional obligation to keep confidential any information they learn from home sellers. That’s what lawyers have to do — in fact, Section 1.8 of the American Bar Association’s Model Rules for Professional Conduct specifically addresses the nature of lawyers’ relationships with prospective clients, saying, “Even when no client-lawyer relationship ensues, a lawyer who has learned information from a prospective client shall not use or reveal that information, except [some narrow exceptions].”
Well, guess what? Apparently no such rule has been written for real estate agents and brokers. Harney interviewed the National Association of Realtors’ (NAR’s) top legal official, Laurie Janik, who said, “The Realtor Code of Ethics does not impose any duty of confidentiality with respect to information provided by a prospective seller client who does not engage the Realtor.”
Harney also spoke with the ethics columnist for Realtor Magazine (also senior vice president and general counsel of Prudential Alliance Realtors in St. Louis), Bruce Aydt, who agreed that the Code of Ethics says nothing about information divulged during listing presentations. Aydt noted, however, that sellers in these conversations likely “have an expectation of privacy ….” Yup, that’s just what the lawyer for the disgruntled home seller would write in the 100-page legal brief to support a lawsuit against a loose-lipped broker.
To be fair, no one is claiming that there’s been a rash of — if any — instances where selling brokers revealed confidential information about a prospective client. I’ll bet most of them have enough business savvy to keep mum. But if you’re thinking of selling, you might not want to put this theory to the test. Unless you want the word on the street to be, “We just won the zillion-dollar lottery and are moving to the Bahamas, you can sell this dump for $1 and we’ll still be rich!!,” keep it to yourself.