Chances are, Realtors already understand disclosure, and what it means for all parties involved. This article is for educational purposes, and for those that want to up their game in their real estate communications. This blog piece will cover the basics of our Principle Instructor, Scott Jones’s message to his students when instructing agents training to pass or renew their Real Estate license.
Disclosure by the Books
SECTION 8. AGENCY DISCLOSURE.
8.1 Seller or lessor agents.
(a) (1) In any real estate transaction in which a licensee is acting solely as agent for a seller or lessor, the licensee shall disclose to a potential buyer or lessee, or to the buyer’s or lessee’s licensed agent, the licensee’s agency relationship with the seller or lessor. Such disclosure shall be made in a timely manner under the particular circumstances so as to avoid to the extent possible eliciting or receiving from the prospective buyer or lessee information which would reasonably be expected to remain confidential and not disclosed to the seller or lessor, such as, for example, information concerning the real estate needs or motivations, negotiating strategies or tactics, or the financial situation of the potential buyer or lessee.
8.2 Buyer or lessee agents.
(a) (1) In any real estate transaction in which a licensee is acting solely as agent for a buyer or lessee, the licensee shall disclose to a potential seller or lessor or to the seller’s or lessor’s licensed agent, the licensee’s agency relationship with the buyer or lessee. Such disclosure shall be made at the first contact with the seller, lessor, or the agent of the seller or lessor.
This is the AREC regulation section relating to agency disclosure. If you represent a seller, you are to make your agency disclosure to the buyer (buyer’s agent) before you make “substantive contact”. This means you let the buyer (buyer’s agent) know that you represent the seller before you begin asking questions about confidential information (e.g. how soon to you need to move). Let’s use an open house as an example of meeting a buyer and needing to make the agency disclosure. If an agent just waves at the buyer as they walk in and never approach them, then the disclosure duty hasn’t attached. But if the agent engages and plans to ask questions, then the duty attaches.
If you represent a buyer, you are to make your agency disclosure to the seller (seller’s agent) at first contact. I use approaching a FSBO as when you make this disclosure as soon as you introduce yourself. So, the agent knocks on the FSBO’s door, the first thing they have to do is introduce and disclose.
Disclosure for the Advanced Agent
Here is where Scott teaches agents to go a step more. He wants them to engage in “effective disclosure”. “I don’t think it is enough to tell a buyer you represent a seller because I don’t think they understand what that really means,” Scott clarifies. “The first step is to introduce yourself, let the buyer know that you represent the seller, which means anything that the buyer tells you must be passed along to my client, the seller. Therefore, if you do not want my seller to know, please do not tell me as the agent. This meets the spirit of the regulation, which is to put the buyer on notice that what they tell you could be used against them in negotiations. And the same goes for a seller. This is also an opportunity for agents to explain agency to the buyer, and possibly gain a buyer client.”
-Scott Allen Jones, Principle Instructor at ACES, Real Estate Continuing Education