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Disclosing Family Interest: Does Father-in-Law Count?

Dear Shannon: The Code doesn’t list “father-in-law” as a relationship Realtors must disclose, yet after my father-in-law submitted the highest and winning bid to a seller I represented, the seller filed an ethics complaint claiming I should have disclosed that the buyer was my father-in-law. Who’s wrong here?

ORLANDO, Fla. – Dear Shannon: I’m a listing broker and listed a home. I presented the seller with three offers from three different buyers, though all were below the listed price. I advised the seller to accept the offer from the buyer who presented the highest of the three offers. In my opinion, this price was fair market price.

After closing, I was stunned to hear that the seller filed an ethics complaint against me because I didn’t tell them that the buyer was my father-in-law – and that “my strong urging” persuaded the seller to accept an offer below the listed price. They claimed I acted more in the interest of the buyer than in the interests of the seller.

I know the Code of Ethics, and since my father-in-law isn’t immediate family, I didn’t have to disclose this to the seller. I’m surprised by the accusation that I didn’t act in the seller’s best interest.

Can you support me on this? – Back Me Up

Dear Back Me Up: I’m glad you reached out. It sounds like you truly thought you were doing what was allowed under the code.

Unfortunately, however, I cannot back you up on this one. Thank you for the opportunity to provide some education on where I think you (and probably others) may have misunderstood the code.

Let’s look at sections of the Code of Ethics and Arbitration Manual (Manual) that seem to apply to this situation.

Article 4 is relevant here and states (the bold is mine): Realtors® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, Realtors® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative. (Amended 1/00)

You said you know the code and your father-in-law is not immediate family, so you didn’t have to disclose this to the seller. Sounds like you may be referring to where “immediate family” is defined in the Manual relating to ethics. Part One – Ethics General Provisions, Section 1. Definitions Relating to Ethics, subsection (l) states:

“Immediate Family” as used in the Code of Ethics includes, but is not limited to, the Realtor® and the Realtor®’s spouse and their siblings, parents, grandparents, children (by birth or adoption), grandchildren, and other descendants. (Adopted 11/89)

“Father-in-laws” is not expressly included in the list of “immediate family.” Notice, however, the language says “includes, but is not limited to.” The “not limited to” language means that the definition of “immediate family” is not limited to just the short list provided. If you read the definition and concluded that “father-in-laws” is excluded because it’s not expressly included, then it’s an unfortunate misread of the language.

Let’s analyze another part of Article 4 (again, the bold is mine): Realtors® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property they own, or in which they have any interest, Realtors® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative. (Amended 1/00)

Notice the language expressly includes in the text of the Article; “or any entities in which they have any ownership interest.” Clearly, if you were presenting offers from any entity in which you have any ownership interest you would have to make this disclosure. Let’s think this through and follow this concept to its logical conclusion. Here there’s a possibility, even if remote, that you will acquire an interest in this property by inheriting it from your father-in-law. Since interest in property created through a family relationship can be closer and more tangible than through a corporate relationship which is cited in the Code as an interest requiring disclosure, Article 4 requires disclosure to the seller that the buyer was your father-in-law.

Also, take a look at Standard of Practice 4-1: For the protection of all parties, the disclosures required by Article 4 shall be in writing and provided by Realtors® prior to the signing of any contract. (Adopted 2/86)

Conservatively, you probably should have put something in writing to the seller when you presented the offer from your father-in-law. Keeping this information from the Seller was contrary to the intent of Article 4.

Even though I cannot back you up on this one, I’m glad for the opportunity to provide education on a misunderstood part of the Manual. Please keep reaching out and know that you have been helpful in educating your fellow Realtors through these shared experiences.

Shannon Allen is an attorney and Florida Realtors Director of Local Association Services
Note: Advice deemed accurate on date of publication. Based on Case Interpretation #4-3.

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