Is it legal for an attorney to send out multiple contracts on the same property simultaneously? The answer is yes. Is it ethical? The answer depends on whether there’s full disclosure. In the same vein, is it lawful and ethical for an agent to represent more than one buyer in negotiations on the same property? Both queries are thorny and merit serious consideration.

 

Attorneys and agents alike agree that while it’s bad form to issue more than one contract on a particular property, it may be necessary for of a variety of circumstances: the contract may be out too long; a problem related to the property may arise during due diligence; an issue regarding financing may be too difficult or too time consuming to overcome; a higher offer with better terms from a more qualified buyer may surface. Since the contract of sale is not binding until it is fully executed, the seller is within his legal rights to withdraw from the deal at hand, negotiate and enter into a new contract with buyer number 2. When there is full disclosure, and when buyer number 1 is offered the opportunity to match the terms of a second contract, neither attorney nor seller’s agent can be faulted, though there’s lots that remains unsaid about a handshake. It’s when disclosure is lacking, that hairs are raised.   

 

If you’ve been in the business long enough, you’ve been there. You have a contract out on a property and you get the notice, usually by email or worse by text, that the property has been sold to someone else. Thoroughly blindsided with the rug pulled out from under you, you must inform your buyer that although he has proceeded in good faith, spent money on an attorney and even begun the process of getting reference letters for the review process, there’s little remedy.  

While sending multiple contracts is not illegal, it raises ethical questions especially when not disclosed to all involved parties. What about “Do unto others?” asks attorney Craig L. Price. “I have to work with these agents and attorneys on more than this one deal.” Though the practice is distasteful and uncomfortable, attorneys Elisabeth Kovac and Pierre Debbas each acknowledged that it is occurring with greater frequency because of the market’s thinning inventory. At a recent NYRS® class on Transactional Real Estate Law, top performing agents discussed successful strategies, and all agreed that attorneys and agents share the capacity to serve as models of ethical behavior, and together we are able to influence client actions. Even if in the end, we are required to heed our clients’ specific instructions, we can communicate to the other side an urgency to execute the contract without having to spell things out. Without doubt, we are fiduciaries to those who employ us, and we may not share privileged information. However, we also have certain obligations to our co-brokers who are also essential to our business. Establishing strong alliances with other agents is arguably as important as developing trustworthy relationships with our buyers and sellers. Over the course of our careers, we may enjoy repeat and referral business from our principals, but week after week, we will interact with our professional colleagues, and the way we communicate with each other is incredibly significant.

 

Onto question #2


Is it possible for the same agent to represent fairly the competing interests of two different buyers in negotiations who each desire to purchase the same property? Can a buyer sue the agent and/or the brokerage because he didn’t win the property and felt misrepresented?


Consider this scenario. You’re working with several qualified, inventory-starved buyers seeking the elusive West End or Park Avenue $3M prewar or equally hard to find Upper East Side 4½ room $1.5M post war. As soon as a new listing hits your screen, you rush to make appointments for all. You’ve established loyal relationships with these buyers and each wants to submit an offer. Does the law provide a standard for action?    


In Rivkin v. Century 21 Teran Realty LLC, the Court of Appeals ruled unanimously in 2008 that an individual agent may not represent multiple bidders on the same property without full disclosure and consent from all parties. The court ruled that an agent in such a position could not negotiate favorably for all prospective buyers, and that a conflict of interest violated the fiduciary responsibilities of confidentiality, obedience, undivided loyalty, accountability, full disclosure and reasonable care. The seminal ruling however allowed that more than one agent from the same firm could act on behalf of different buyers bidding on the same property without disclosure and consent.


In our business dealings, ethical questions arise in the grey areas between right and wrong when there is a conflict of interest or a dilemma between values. When you treat others as you would want to be treated, there is understanding and appreciation for the other side. In the end, it’s all about ethical fitness, credibility and preserving your reputation as a fair agent.