When YOU Sell
By "you" I mean you, the person holding the real estate license. And "sell" refers to the sale of property you own, alone, or with others. There are a number of issues involving you marketing your real estate, but I want to touch on just a few.
We begin with conflict of interest. Is it a conflict of interest to market and sell your property? No. Like you, all sellers generally want as high a purchase price as is reasonable, a quick sale and little expense, both pre- and post-settlement. As a seller, you want the same.
Conflicts arise when you introduce a buyer you represent to your property and when you act as a dual agent for any reason.
Now many of you understand this, instinctively. Yet there are those who do not. I very recently took a call from a young couple who had been working with a buyer agent for nearly a year. They made several offers which were rejected and were becoming desperate. At this point, in their fruitless search, their agent decided to sell her home. The agent did not list her property in the multi-list, and her broker was unaware that she was marketing her property. These naive first-time buyers decided to buy. How much of their decision was based on the "advice" of their agent is not clear, but I'm sure the buyers will ultimately conclude they were coaxed.
The agent wrote the offer. She identified herself as both the seller's agent and the buyer's agent, meaning that she was a dual agent. Further, she identified her broker as the buying and selling broker, making her broker a dual agent despite that the broker still had no knowledge of the transaction as it was not run through the office. If the foregoing weren't bad enough, consider this . . . the agent actually had the buyers commit to paying her a fee on top of the purchase price.
This scenario raises two major issues. First, how can you sell your own property yet claim an agency relationship, with corresponding fiduciary responsibilities, with the buyer? Did the agent advise the buyers to get an independent opinion of the property's fair market value? Did she even advise the buyers of the conflict of interest she had trying to represent herself and the buyers in the same transaction? Did she advise them to seek an attorney who could advise them?
Similarly, I've had cases where list agents seek to purchase their seller's property. This too is fraught with conflict as the seller will claim to have relied on your advice when setting the price and terms. Eventually, post-settlement, the seller may feel taken advantage of, and you know where that will go.
A safe rule, the only rule, is that you cannot have a personal stake in transaction yet claim to represent the other side. The conflict is insurmountable and would be a violation of not only license law and rules prohibiting conflict of interest, but also a violation of Pennsylvania's Consumer Protection and Unfair Trade Practices Law that allows courts to impose punitive damages on violators. Send the consumer to another broker or to their lawyer. Do not risk your license!
Second (as if the above is not sufficient reason to avoid dual agency in this situation), consider that many errors and omissions insurers will not insure claims that arise from the sale of property when the seller (or one of them) is the licensee involved in the transaction. Brokers, you should check with your E&O insurer to determine whether you have coverage when a licensee lists and sells his or her own property. Further, you should have a policy that requires every licensee to bring their personal transactions into the brokerage (whether fees are paid is up to you). When one of your licensees sells his own property, he will undoubtedly use a standard agreement of sale that will identify the licensee and perhaps your brokerage on it. It will prove an uphill battle to claim that your brokerage had nothing to do with the transaction if sued. If you are potentially liable for what your agents do, you should know what they do!
Copyright© James L. Goldsmith, Esquire, 2022
All Rights Reserved
Facts, opinions and information expressed in the Blog represent the work of the author and are believed to be accurate, but are not guaranteed. The Lancaster County Association of Realtors is not liable for any potential errors, omissions or outdated information. If errors are noted within a post, please notify the Association. Posts represent the author's opinion and are not necessarily the opinion of the Association.
