May 22nd, 2023 at 3:55 pm
Multiple Choice Question: Has the buyer’s agent violated his or her duty to disclose that familial relationship when submitting the buyer’s offer? Pick the best answer:
A. Yes, as a matter of both law and ethics.
B. Yes, as a matter of law only.
C. Yes, as a matter of ethics only.
D. No.
Answer: Answers A and B are wrong. Contrary to popular belief, there is no law that specifically requires a buyer’s agent to disclose to the seller that the buyer is the agent’s cousin or other family member. What the law requires is for a buyer’s agent to disclose to the buyer if the agent has a direct or indirect ownership interest in the property being sold (see section 10177(o) of the California Business & Professions Code). That legal requirement is obvious, given that agents should reveal their personal interest in selling a property for as high of a price as possible, when they represent the buyer who wants to pay as low of a price as possible. In fact, our own company’s Risk Management Plan does not even allow our agents selling their own properties to represent the buyer.
Answer C is the correct answer. Under the NAR Code of Ethics, a buyer’s agent should disclose to the seller’s side that the agent is presenting an offer of an immediate family member (see Article 4). Such disclosure must be made in writing before the signing of any contract (see Standard of Practice 4-1). The term, “immediate family member,” is not specifically defined in the Code of Ethics, but it could easily include a cousin.
If a buyer’s agent violates the NAR Code of Ethics, a complaint can be filed at the local board of REALTORS® to which the violating REALTOR® member belongs to. After a hearing and other procedural requirements, the local board can impose disciplinary sanctions against the violator, such as a letter of reprimand, a fine up to $15,000, or even suspension or expulsion from membership. However, an ethics violation, absent anything more, generally has no legal bearing on the underlying sales transaction.
-Thank You to Marilyn Simon (Pasadena Manager) for suggesting this week’s legal tip!
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