Non-Disclosure of Conditional Sales – Just a lot of Smoke & Mirrors

The Calgary Real Estate Board has indicated to its members that in an effort to appease the Competition Bureau of Canada, the Calgary Real Estate Board as implemented systems which will allow Sellers the option of not disclosing the existence of a conditional sale of their home. The idea behind this is that it could be argued that  by not disclosing the fact that the property is already under contract, on the Calgary Real Estate Board MLS System®, they might have a better chance of soliciting back-up offers.  Real estate agents should be having this discussion with their seller to determine how they would like this to be handled.

There are many instances of this occurring and this has become a real head-ache for buyers and buyers agents alike.  Seller’s should however, think twice about the repercussions of such an arrangement and how this might affect a future sale.

The vast majority of buyers have absolutely no interest in looking at a property which is already subject to a Conditional Sale Contract, and Buyer’s Agents have very little interest in showing properties which are in effect, already Conditionally Sold.

Non-disclosure of Conditional Sale

By instructing their agent in writing that it is their wish, not to disclose the existence of such a pending sale, this forces the hand of Buyer’s Agent’s everywhere to have a conversation about whether they would prefer to skip over such properties.   Most often the answer is a resounding YES, except in very rare cases.  Since the conditional sale is not registered on the Calgary Real Estate Board MLS System®, the Buyer’s Agent is then compelled to ask the Seller’s Agent at the time the showing appointment  is being booked, whether or not the home is already under the terms of a written Service Agreement.

If the Seller’s agent responds in the negative, then the showing appointment is booked and everything goes as planned.  In cases, when a conditional sale exists and the seller’s agent has been instructed not to disclose this fact, the seller’s agent is compelled to reply that he has a written instruction from the seller not to disclose. In essence what they are saying is that there is in fact a conditional sale on the property and as a result the showing is most often cancelled except in rare circumstances.  This then brings us full circle and therefore I would suggest that the whole exercise was pretty much futile.

This begs the question whether there is indeed any benefit to the non-disclosure of a conditional sale and I submit that in not disclosing this fact the seller is actually doing themselves more harm than good.

The Calgary Real Estate Board in their wisdom has created a new field to accommodate these instances which makes far more sense.   The new field is the designated “U” for Under Contract, and allows the seller to indicate the property as being Active on the Calgary Real Estate Board MLS System®, while disclosing the sale to organized real estate and their buyer clients only.  This allows the buyer the opportunity to make an informed decision about whether they would like to view such properties or just wait until the sale closes or collapses, as the case may be, before they go out of their way to accommodate to the seller’s wishes, to their detriment.

More importantly, when the pending sale is not registered in any manner on the Calgary Real Estate Board MLS System®,  if the sale collapses, there is no easy way to notify organized real estate that the property is now back on the market, and thereby the seller may lose out on any subsequent offer from those buyers who are waiting in the wings for that very property.

I always encourage my sellers to utilize the field “U” as this is in my opinion the far better option.  The difference between a property which is “Under Contract” and one that is “Pending” is that if the property is marked Pending, no further showings are indicated, while if it is “Under Contract” the seller is indicating that he is soliciting back-up offers and will be happy to accommodate more showings if the buyer so chooses to view it, under the circumstances.

This article Not intended to offer advise or solicit business from members of the public already working under the terms of a written Service Agreement.