The answer largely lies within the Code of Ethics, and while there are some specific requirements, the keyword for all transactions is “transparency.”
ORLANDO, Fla. – It’s still a hot market and agents are as busy as ever – great news for the real estate industry!
In some cases, agents even find themselves working on their own personal transaction as a buyer or seller. But what are the “rules” when an agent representing a transaction is also a buyer or seller in that transaction? The answer lies mainly within your Code of Ethics, so let’s take a look.
Real estate licensees have several legal obligations and requirements per Florida law. These are mainly outlined in Chapter 475 of the Florida Statutes. However, if a real estate licensee is also a Realtor, that licensee is bound by the National Association of Realtors®’ (NAR) Code of Ethics.
The general premise of your legal obligations and NAR’s Code of Ethics is transparency. The Code of Ethics and Arbitration Manual (CEAM) states that the Code of Ethics was created, in part, to make a “commitment to business integrity and fair dealing.” The duty to operate honestly and fairly is also a basic obligation of all agency relationships that licensees may have with buyers and sellers under Florida law.
This has caused some confusion, though. A common call to the Florida Realtors Hotline is, “What are an agent’s obligations when that agent is also the seller or buyer of the property?”
Article 4 of the Code of Ethics provides guidance on this question and states:
“Realtors shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, Realtors shall reveal their ownership or interest in writing to the purchaser or purchaser’s representative.”
“Immediate Family” as used in the Code of Ethics includes, but is not limited to, the Realtor and the Realtor’s spouse and their siblings, parents, grandparents, children (by birth or adoption), grandchildren and other descendants.
Standard of Practice 4-1 specifies that the disclosures required by Article 4 shall be in writing and provided prior to the signing of any contract.
Let’s break this down a bit because this section of the Code differentiates Realtors who are on the buying side of the transaction vs. those on the selling side.
The first part of Article 4 covers the disclosure involved when representing the buying side. If presenting an offer from the Realtor themselves, any member of their immediate families, their firms or any member thereof or any entities in which the Realtor has any ownership interest, the Realtor must provide written notice of their interest to the listing agent/sellers before signing a contract.
It’s important to note that the disclosure requirement must be in writing. While Florida Realtors offers addenda to contracts to make this disclosure, that’s not the only way this type of disclosure may be given. An agent could, for example, send this disclosure in the body of an email along with attaching an offer.
Some calls to Florida Realtors Legal Hotline suggest that a few Realtors have refused to pass offers along to their sellers if the specific addenda to the contract wasn’t used. Please understand: Unless your sellers indicated in writing that they don’t wish to see any offers without the corresponding addenda making the disclosure, you’re likely in violation of your obligations to those sellers. Again, the Code requires that the disclosure be given in writing – but it doesn’t mandate that the disclosure must be in the contract.
The second part of Article 4 clarifies that if you’re a Realtor selling personal property or property in which you have an ownership in, you must also disclose it in writing before the signing of any contract. Aside from personally occupying the property, the most common example of this is property owned by a corporation, like an LLC, in which the Realtor has an ownership interest.
In closing, it’s important to not only understand what types of disclosures apply and when they should be presented, but also how those disclosures can be made.
Meredith Caruso is Associate General Counsel for Florida Realtors
Note: Advice deemed accurate on date of publication
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