A Modern Real Estate Fable
Imagine if you will, a large townhouse community, in a Raleigh suburb. All the units are the same. Same age, same size, same floor plan, all two stories, etc. The only difference in the units is any interior updates that the owners may have done in the ten years since it was built.
And of course, after ten years, the owners are starting to see an increasing number of units come on the market for sale. Not surprisingly, the asking prices are all very similar, and so are the sales prices.
Now Joe has been living here since the place was built. But his employer just went bankrupt and Joe's pretty much been living paycheck to paycheck. So he too wants to sell. And fast. First he thinks, well I'll just underprice my selling neighbors, and I'll get a quick sale. But he can't afford to lower his asking price too much, because he needs the money. But then Joe thinks, my goodness, maybe some of my selling competitors need the money too. I cannot afford for any of them to undercut my price, after I undercut their's.
So Joe thinks very hard and comes up with a...solution.
Now Romeo and Juliet are a young newlywed couple on a tight budget. They've been watching this townhouse community, but realistically it is simply out of their price range. But they continue to keep an eye on it. And when they see Joe's for sale sign, they are the first phone call he gets.
Joe Yes, it is for sale. No, that is all I can tell you. First you must sign my Non-Disclosure Agreement.
R&J Well we never heard of such. Why is that?
Joe It is very simple. As I am sure you are aware, a number of my neighbors also have their homes for sale. And I just don't want you, or any other potential buyer, to discuss my asking price and terms with any of my competitors.
R&J Well okay. Seems unnecessary, but okay.
So Romeo and Juliet sign the NDA, Joe shows them the home, and gives them a very comprehensive selling package, which of course, includes his asking price. All of which is covered by his even more comprehensive NDA.
Afterwards...
Juliet Well, it's just like all the others.
Romeo But it is $25,000 cheaper.
Juliet Yes, but can you believe how he's finished the place. We'll have to spend at least that much on the walls, the flooring, the baths, and the kitchen. Maybe even more.
Romeo Hmm, let's go back and look at that other unit we really liked.
So they go back to see Fred's unit.
Fred So you've come back. Are you ready to make an offer?
R&J But Fred, we've already told you that we cannot meet your price.
Fred Yes, I'm pretty firm on that. But it's right about the same as everyone else here.
Romeo Well actually...
But Juliet cuts him off...
Juliet No Romeo, we cannot discuss that.
Fred is somewhat perplexed. But hey, kids these days.
Afterwards...
Romeo We should be able to tell him that he's not the same as everyone else.
Juliet But we agreed not to.
Romeo So we'll just have to make Fred an offer at the lower price and see what happens.
And they do.
Fred I told you kids that my price was firm. Why are you wasting my time, and your time, with this offer?
R&J Very sorry Fred, but that is the best we can do.
Afterwards...
Romeo If we could just explain to Fred, I'm sure he would come down. He seems like a reasonable person.
Juliet Well, we did not have to sign that NDA. We did that voluntarily. Next time we will know better. In the meantime, I think I'll write to the North Carolina Real Estate Commission and ask them to look into it.
Romeo Hey, that's a great idea! Their job is to protect the public.
But when the NCREC gets wind of this, they love Joe's idea. After all, we are here to protect the consumer. And sellers are consumers too. It is none of Fred's business what Joe is asking for his competing unit. We must protect Joe. We certainly wouldn't want Fred to suspect that Joe is in any financial difficulty. That would be unethical.
But we should protect Fred too. Because actually it is also none of Joe's business what Fred is asking. Joe should not have the ability to undercut Fred. Joe needs to price his unit based on his own individual judgment and what he, alone, is willing to accept. Not what his competitors may or may not be willing to accept. That too would be unethical.
But why go through all that hassle with the Non-Disclosure Agreement? No, no, what we are going to do is institute a rule that says our licensees may not disclose the details of any seller's asking price and terms to any competing seller. Buyers should not be able to negotiate with a seller by using the asking price of any competing seller. That is patently unethical and we are just not going to allow it. It will be a No Shopping rule for buyers.
That way, Fred and Joe, and all of their other competing sellers are protected from all those predatory buyers. And from each other.
So here is the rule they came up with:
21 NCAC 58A .0115b DISCLOSURE OF ASKING TERMS PROHIBITED
A broker shall not disclose the price or other material terms contained in a party's solicitation of offers for purchase, sell, lease, rent, or to option real property to a competing party without the express authority of the party soliciting the offers.
In a Rule Change Announcement in the NCREC Bulletin, the Commission stated, "We take our mission to protect the public interest seriously and we are delighted with the new rule. We believe it perfectly complements Rule .0115a (formerly .0115)."
In a new section in the Bulletin labeled In the Works, the Commission went on to add, "Later this year we have a major report coming titled How Single-Agent Dual Agency Protects Consumers. You don't want to miss that one."
Public interest protected. Check.