Real estate professionals buying your house or selling you theirs

 

Real estate professionals are consumers too, and they buy and sell property on their own behalf. But when they’re doing so, it can create a conflict of interest and they need to disclose their direct or indirect interest in any purchase or sale as soon as possible and definitely before any offer is made.

What is direct and indirect interest?
Direct interest: when a real estate professional owns or partly owns a property that is being sold or they are the party interested in buying a property.

Indirect interest: when a real estate professional is related to, or has a personal relationship with the person selling or buying a property. An indirect interest in a property has the same disclosure requirement as a direct interest.    

When real estate professionals have a direct or indirect interest in a transaction, they must make written disclosures to you or your real estate representative at the earliest practical opportunity and before any offers are presented or considered.

Written disclosures to you when you have no representation 
When you are not represented by a real estate professional, and a licensed real estate professional wishes to buy your property or sell theirs to you, they must disclose in writing:

Written disclosure to you when you are represented
When you are represented by a real estate professional and another licensed real estate professional wants to buy your property, or sell you theirs, they must disclose in writing that:

Written disclosures when someone employed by the same brokerage as your real estate representative wants to buy your property or you want to buy theirs
Some brokerages have hundreds of associates, so it’s not unusual to sell to a person affiliated with the same brokerage as your representative. If this is the case, the brokerage must immediately disclose to you:

They must also provide you with an opportunity to seek legal and independent advice.

Remember, when a licensed real estate professional has a direct or indirect interest in a real estate transaction, they cannot represent the other party to the transaction. If you want to continue with the transaction, you won’t have representation unless you hire another brokerage.

Examples

  1. A real estate professional is selling a house he owns through a private sale.  The professional’s neighbour expresses interest in the property and wants to write an offer. They know the owner of the property is a licensed real estate professional and they ask him questions about what they should include in a purchase contract. The real estate professional cannot give the potential buyer advice as that may unintentionally be representing the buyer, which he can’t do so because it’s a personal trade in real estate.
  2. A real estate professional is making an offer on a property that they plan to resell as soon as a land assembly for a large retail complex comes together.  When making his offer, the real estate professional discloses he is an associate with ABC Realty and that he may resell the property later.  This is not an adequate disclosure, as the real estate professional must disclose there is a land assembly for the development of a possible retail project, which could make the land worth much more at a future date if the project goes forward.  This disclosure helps prevent real estate professionals from using “inside information” for their own benefit or for the perception that they are doing so.
  3. A real estate professional with ABC Realty owns 25 per cent of a company. The company wishes to purchase a property listed with XYZ Realty. The real estate professional has an indirect interest in the purchase through her ownership in the company and must provide proper disclosures in writing.  The buying real estate professional must disclose she is a real estate professional registered with ABC Realty. This disclosure needs to take place before the seller considers the offer.
  4. A real estate professional’s mother-in-law wants to buy a commercial building that is listed with the real estate professional’s brokerage. The brokerage must disclose to the seller, in writing:,
    • there is a conflict of interest because the buyer is the mother-in-law of a brokerage professional
    • disclose what, if any, of the seller’s confidential information the buyer already has
    • disclose who represents the buyer.

The seller should have an opportunity to seek legal and independent advice.

 

 

 

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