Legal Issues Forum Q&A: Selling a property owned by a relative
On October 18, 2016
By Peg Ritenour, OAR Vice President of Legal Services/Administration
At the recent Ohio Association of REALTORS Annual Convention & Expo, Cleveland attorneys Cindy Lammert, Jon Deegan and Mark Rodio put on another jammed pack risk reduction program addressing a variety of topics including team advertising, breach of fiduciary duties, service animals, inspection issues, and more. If you weren’t there you missed a fantastic program!
Although there wasn’t enough time to answer everyone’s questions, OAR legal staff is using the OAR Daily Buzz to address some of the issues that were raised. REALTORS sometime get involved in representing a relative in a transaction. In this Q&A, the agency and disclosure issues involved with listing a family member’s home are addressed.
Q: I am going to list my daughter’s house for sale. If a purchaser contacts me to buy her house, do I have to be a dual agent or can I represent just my daughter?
A: Under Ohio license law, every brokerage is required to have a company policy on agency that addresses several issues, including how affiliated agents are to handle transactions involving relatives. In this situation, a brokerage could have a policy that:
- Requires you to treat the purchaser as a customer and represent your daughter only;
- Allows you to represent the purchaser and act as a disclosed dual agent with the consent of both parties; or
- Requires that the purchaser be referred to another licensee in the brokerage for representation.
Thus, at the time you list your daughter’s property it is important to check with your broker or manager to determine your brokerage’s policy regarding this situation.
Q: If my brokerage policy provides that I treat the purchaser as a customer and just represent my daughter, do I have to disclose to the purchaser that the seller is my daughter?
A: Although there is nothing in either the license law or the REALTOR Code of Ethics that specifically requires this, it is highly recommended. This will assure that the purchaser understands your relationship with the seller and can decide if he/she feels comfortable working with you directly in the transaction.
Q: If my brokerage policy allows me to represent just my daughter, how and when should I make this disclosure?
A: It is recommended that the disclosure be documented in writing. This is often done in the purchase contract. It is important to discuss this with your broker or manager to determine the brokerage’s policy on how it wants the disclosure to be made.
Q: Should I handle it the same way if I am going to be a dual agent, representing both my daughter and the purchaser?
A: Under Ohio license law, when you are acting as a dual agent you are required to disclose on the Agency Disclosure Statement if you have a personal, family, or business relationship with either of the parties. Thus, in this situation you are required to disclose the fact that the seller is your daughter in the space provided on the Agency Disclosure Statement.
Q: What limitations are placed on me as a dual agent? I know my daughter will expect me to look out for her best interests.
A: Page two of the Agency Disclosure Statement spells out exactly what you can and cannot do when acting as a dual agent under Ohio law. As this explains, as a dual agent you will not be permitted to:
- Disclose the buyer’s confidential information to your daughter;
- Advocate or negotiate for your daughter;
- Suggest or recommend specific contract terms to your daughter, including price; or
- Act in a biased manner on behalf of your daughter.
Thus, as a dual agent, you must act in a neutral manner and cannot engage behavior that is designed to protect or further the best interests of your daughter. If she expects such representation or you believe you cannot act in an objective, unbiased manner, then you should not act as a dual agent. It is extremely important that you discuss this situation with your broker or manager. To avoid violating the license law and exposing yourself and the brokerage to liability for breach of your duties you should probably represent just your daughter and either treat the purchaser as a customer or refer the purchaser to another agent for representation.
Legal articles provided in the OAR Daily Buzz are intended to provide broad, general information about the law and is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.