Redfin “Offer Insights”: Concerns Raised Over Online Posting Of Contract Negotiation Details

by Rich Vetstein on February 10, 2013 · 3 comments

in Disclosures, Massachusetts Real Estate Law, Offer To Purchase, Real Estate Marketing, Realtors, Technology

redfin-logo-tag-webControversial New Internet Practice Raises Confidentiality Concerns & Realtor® Scorn

The internet based real estate brokerage company, Redfin, is now arming buyers and sellers with insight into the negotiations that take place when the firm’s clients submit winning — and losing — offers to buy a home. On its heavily trafficked website, the Seattle-based brokerage is now displaying “Offer Insights” detailing intimate details of negotiations surrounding offers that Redfin agents submit on listings. Redfin claims that buyers can opt out of the program, and no addresses are revealed before closing. (But, addresses are shown for sold properties).

Here is an example for two properties in Quincy, one where an offer was accepted and one where it was rejected:

redfin offer insights copy

Confidentiality & Ethical Concerns?

From a strategic and marketing perspective, this new idea is certainly creative, as it gives Redfin agents and their potential clients a competitive advantage over other agents and aids in providing transparency in the marketplace. However, posting details about private contractual negotiations raises some thorny legal and ethical concerns, and many non-Redfin listing agents are crying foul.

Some Realtors assert that the details of offer negotiations are private and confidential, and therefore, cannot be disclosed without the consent of all parties to the transaction, especially the seller. I don’t necessarily buy into that. I’m not aware of any legal confidentiality protection given to private contract negotiations — indeed they are 100% discoverable in litigation, at least in Massachusetts. A buyer and seller are in an adversarial position, so there is no special legal relationship between them warranting a duty to keep negotiations private.

I can see why a seller would be very upset to find out that the juicy details of negotiations are posted on the internet for the world to see. A seller may certainly want to know this before entertaining a Redfin offer. Moreover, a seller (and a creative attorney) could manufacture a tortious interference claim if a Redfin Offer Insight proves to interfere with a potential deal with another party. That’s a lawsuit for another day…

MLS Rules and NAR Code of Ethics

Some Realtors say that the Redfin practice violates Multiple Listing Service rules and the NAR Code of Ethics. Multiple listing services have rules for commenting on sites which contain MLS information. A seller may instruct her listing agent to disallow public comments on listings. A Redfin buyer’s agent could be in violation of MLS rules if he leaves remarks about the house or negotiation, according to some non-Redfin agents. It will be up to the particular MLS to enforce its own rules against agents; they have no legal effect per se.

The National Association of Realtors Code of Ethics prohibits Realtors from using confidential information of clients for the Realtor’s advantage or the advantage of third parties unless the clients consent after full disclosure. The catch is that “confidential information” is defined as whatever state law says is confidential.  As I said earlier, private contract negotiations are not legally confidential in Mass., so I’m doubtful this would apply.

In sum, the Redfin Offer Insight feature may well be legal, but tight-walks through the ethical rules governing MLS’s and Realtors. As long as they don’t disclose names or property addresses until the deal closes, I think it’s ok legally (in Massachusetts), and I do appreciate giving buyers as much market information as possible. On the flip side, it may put non-Redfin listing agents at a competitive disadvantage. Maybe that’s why they are crying foul?

Agents, what are your thoughts? Post your comments below.

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RDV-profile-picture-larger-150x150.jpgRichard D. Vetstein, Esq. is a nationally recognized real estate attorney who writes frequently about legal issues facing the real estate industry. He can be reached at info@vetsteinlawgroup.com.

  • Bobbie Files

    I always look for an opportunity to spar with an attorney………I am typing that sentence with a smile in as much as I do really feel this way. To have the free form to argue with an Attorney without the lame cop out of “Be careful as you are borderline practicing law” which I do feel as lame and only used by an attorney who KNOWS that I have out maneuvered and out skilled him /her. Now for the “case” at hand: this case is unique in as it offers “blow by blow” details of an ongoing “nameless” transaction. If real estate was not local I could see it being referred to as anonymous without the mention of the addresses, alas real estate is VERY local. In big cities I can perhaps, in some very vague sense, see the value in knowing the “Days of our Lives” value of the blow-by-blow details of a transaction although tying that to my transaction involving different people in a different situation in a different location, I do not see the intrinsic value other than for gossip or entertainment and perhaps in a wide scope semi-educational. Then we get to the local part of real estate. I know that lawyers uphold the law, as vague and as argumentative as the law can be, and I know that you, Atty Vetstein, have stated on Facebook today that Realtors are not known for our honesty (which I find a very disparaging and not an entirely fair or at a minimum a slanted comment), which is rather humorous coming from someone in an industry which liar/lawyer are synonymous BUT you are held to a LOWER standard than a Realtor. Realtors have a Code of Ethics to uphold to that is above the licensing law to obtain a Real Estate License. Lawyers can say almost whatever they want to obtain information to use in defending their client, as a Realtor I cannot. I have an obligation to be Honest. I have an Obligation to treat each party with Honesty and disclose pertinent facts to the property BUT to have confidentiality to personal information of the party I represent. You have indicated that the negotiations of a transaction are not personal and have been disclosed in a court of law and MA laws do not treat that as confidential, and as much as I find that repugnant I also see that as “after the fact” and as opposed to my Code of Ethics. Standard of Practice 1 Article 1-15 states that we must obtain the seller’s approval to disclose the existence of another offer to purchase, and Article 1-13 specifically states that we must advise when the terms or conditions of the offer may not be kept private. Those both indicate that BOTH parties must consent. Now I am prepared for the argument that “no address is listed until closing” and that may skirt the COE and any laws, but I am back to my “Real Estate is Local” argument, and that is in a big city it may be anonymous but in a small area we all will know who and what property is being discussed, so the lack of address does NOT make it anonymous and THAT becomes a problem. I see this website fraught with problems and their legal department having ensured themselves a long, lucrative employment. I see that I will have to advise my sellers of this potential which would allow them to refuse Redfin agents access to their properties.

    • http://www.facebook.com/miriambernstein Miriam Bernstein

      Is it not discriminatory to not allow access? Are you not preventing the client from seeing the property?

    • http://www.massrealestatelawblog.com Richard Vetstein

      Bobbie, attorneys, too, have a very strict code of ethics and rules of professional responsibility. http://www.mass.gov/obcbbo/rpcnet.htm They are quite robust and in many instances much, much stricter than a Realtor’s code of ethics. We are not allowed to lie, contrary to popular opinion and we can be disbarred for untruthfulness in front of a tribunal.

      On to the Redfin issue, the COE does not apply because there is no privity or fiduciary relationship between the buyer’s agent and the seller. To the contrary, they are in an adversarial relationship.

      Article 1-15 does not apply for this very reason. Further, Article 1-13 does not apply by its own terms: The provisions says that a buyer’s agent must merely disclose to a buyer “the possibility that sellers or sellers’ representatives may not treat the existence, terms, or conditions of offers as confidential unless confidentiality is required by law, regulation, or by any confidentiality agreement between the parties.” It is merely a disclosure obligation; it does not require that anyone keep anything confidential.

      There is nothing in the Code supporting your assertion that “both parties must consent.” The drafters knew how to write English and they could have easily written that very obligation. They did not on purpose because it was never their intent to!

      So, your arguments are, as we say, built upon pillars of sand — which have now crumbled into nothing. The verdict is in, and I win….thanks for playing…

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