New rules regarding conditional sales disclosure

[onetwo_threefour]

So, any thoughts on the new rules allowing Sellers to choose not to disclose that a property is conditionally sold on MLS?

see article
http://www.calgaryherald.com/homes/C...246/story.html

Personally, I can understand sellers not wanting their properties to be removed from the market based on an uncertain conditional sale, but I also think this could potentially be abused and leave buyers with a pretty bad experience. While a prospective buyer's realtor can theoretically ask before arranging a showing whether there is a c/s, a lot of showings are now arranged through third parties or assistants who may not be able to provide the necessary info.
A buyer may invest a significant amount of time and effort to investigate the property, only to find out after that their offer would only be a back up to an existing accepted offer. This is even worse if the buyer is unrepresented and doesn't know the questions to ask.

I'm not sure that this rule change addresses a significant pressing problem in the industry as most Realtors bring pre-qualified buyers, and a fairly large majority of conditional sales do go firm. I think that as a matter of balancing the rights and expectations of buyers and sellers the previous situation my have been preferable, but I'm open to be convinced otherwise. I do have a couple of scenarios to relate where I see this change as potentially making the whole process less certain for everyone, but I'll get into those of discussion warrants it.

Anyone have an opinion? (it is the internet after all)

[ken0042]

Personally I like it. I would think that any decent realtor would be checking that for me first before showing the house; and if he doesn't then I have a way to weed out a sloppy realtor and find another.

I guess it would depend on what the conditions were on the sale. If I was selling a house that I knew was in excellent shape; and the only condition was a home inspection- then I would expect my realtor to list it as C/S. However this will allow more people to accept offers with conditions like financing, sale of the buyer's home, etc. One of the downsides of accepting one of those offers was that it made their house harder to keep on the market.

A friend recently sold his house, and declined the first offer because of the conditions. As it turned out that was the best offer he ended up receiving.

[newts]

I have mixed feelings on this one.

The positive is that if I have a deal where I think there may be issues with conditions, I can continue to market the property. I can tell you that I've had situations where I've actually held off a couple of days to update my listings to C/S because I suspected some issues with the offer. As a Realtor, your ears always perk up when you see that a property has been C/S and didn't go firm. First instinct is to always assume that there might be something wrong with the house, which isn't good for sellers. In reality it may be financing that just fell through.

On the other hand, certainly more due diligence will have to be had when showing my buyer clients some properties. But sometimes it's hard to get a hold of listing agents, for the reasons that onetwo_threefour alluded to. If you get a client calling you to see something in a few hours, sometimes it's tough to get a hold of the right people because of third party systems/assistants for booking showings.

The way I will proceed, is that if my seller and I have confidence that the deal will close, I will advise C/S status. If we have concerns, I'll advise that we keep the listings active. Often, you know if you're going to have potential issues post the offer, based on how things go during the negotiation stage.

[onetwo_threefour]

I agree on pros of the situation for the Seller, but in terms of the Buyer's realtor doing their job, based on the new rule, all that realtor can do is ask the listing realtor and hope they tell the truth. According to the owner of one brokerage that I work with a lot, there is already a major brokerage in the city taking the position that the listing realtor doesn't have to disclose a c/s even if asked outright. It may be that they will say they have been instructed not to say which is probably a pretty big hint to a buyer's realtor, but its not clear and there's not much else the buyer's realtor can do.

I also imagine a situation where a buyer is looking at two properties they like, they write an offer on one, but by the time they find out it's c/s after presenting an offer and waiting 24h or more for a response, the other property they would have written on bas been sold. It's really difficult for a buyer to manage risk in this type of scenario which is another reason why I think I'm biased against it.

[Winsor_Pilates]

We don't use conditional sales status in Vancouver and I prefer it this way.

If you're arranging showings, the listings agents still tell you when there's an accepted offer in place, so you're not going in expecting otherwise.

Pretty much every phone call on a listing starts with "is it still available". Problem solved.

[onetwo_threefour]

I suppose that where you have a historical precedent that has worked, the kinds of issues I'm raising don't come up because there is an established custom for how to deal with this. Even Edmonton has not used the c/s status for a number of years. I guess my issue is partially relating to the rationale for making the change. Is there really a reason not to disclose the c/s status if asked as this unnamed brokerage is proposing. That's a separate issue from whether the c/s status is used on MLS, but they are definitely related, and if one broker is using the rule change as an excuse to deflect the question when directly asked, then that too is part of the ramifications to be considered in making this change.

is there really such a problem with deals not firming up that this chamge is needed.

[onetwo_threefour]

^ That's a good point fotze, and kind of what I'm trying to get at as well. The easy answer is the the Realtor's ethical obligations include a duty of honesty so they can't lie to another industry member or member of the public when asked directly. However, I'm always nervous when a Realtor's ethical obligations seem to conflict with their fiduciary duties to their own client and the client's instructions.

The thing about c/s status is that it never meant that a buyer couldn't come in and view the property and make an offer, it just made it unlikely that a buyer or buyer's realtor would bother given that conditional offers usually firm up. Really the difference now is that you're potentially wasting buyers' and buyers' realtors' time making them chase down information that is likely going to make them refuse to view the property anyway so that a Seller can get some continuing action on the property. It makes me wonder if savvy Sellers will want to start putting in Seller's conditions that run as long as Buyer's conditions so they can pull the plug if a better offer comes in.

Effectively this is just a 'sneaky' way of getting around a buyer's unwillingess to waste time looking at c/s properties if you look at it from a buyer's perspective.

[Winsor_Pilates]

^^
I see the point you're both getting at. IIRC, we're obligated to disclose that there's an accepted offer.
I tried to set up 4 places to show a client today and 3 that I called her accepted offers on them.
Never really thought of an agent hiding it, don't think it ever happens and can't really see why an agent would?

[Travis Munroe]

I love the new rule and Winsor, you are more used to it I assume as you have done it that way in BC for a bit???
All this does is protects sellers. To often a home is taken off the market for a week only to have the deal not close.

[onetwo_threefour]

Originally Posted by Winsor_Pilates

^^
I see the point you're both getting at. IIRC, we're obligated to disclose that there's an accepted offer.
I tried to set up 4 places to show a client today and 3 that I called her accepted offers on them.
Never really thought of an agent hiding it, don't think it ever happens and can't really see why an agent would?

The brokerage I get the most referrals from also takes the position that the realtor is obligated to disclose if asked directly, but as for why a realtor/sellerwouldn't disclose if asked I suppose it comes down to the same argument for this change being made in the first place, if you tell people they won't view the property.

This unnamed brokerage that I mentioned that is taking the position that they don't have to disclose even if asked (which is not Travis' brokerage either by the way, that is not why I'm being circumspect), seems to be suggesting that the Seller's instructions trump a duty of honesty. That is a dangerous precedent to set, in my mind. I assume that this position will be repudiated by CREB, but the rule change is what has raised the issue inthe first place.

While Travis says he loves the rule, I'm wondering if he would feel the same as a buyer's agent running up against the uncertainty of whether you know what you are looking at with clients. Also, I see buyer's agents needing to write in more conditions to offers to allow their Buyers to continue shopping if they are a backup offer which makes it critical for the Buyer's agent to know the status before writing an offer.

Again, I am not against this rule change per se, but I do think it opens up some tricky technical and ethical issues.