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Realtors Selling Own Property Still Bound to Follow Code?

Dear Shannon: If a Realtor sells a home they also own, are they still subject to the obligations of the Code of Ethics? What if a Realtor isn’t acting on behalf of others in the transaction?

ORLANDO, Fla. – Dear Shannon: I listed my home for sale through my broker and put it on the MLS. A buyer – also a Realtor® – purchased the home.

Months later, the buyer called me, furious and screaming because the roof leaked during heavy rainstorms. Their roof contractor said I had to have known about the defective roof before listing the home, and that the roof needs to be completely replaced. The buyer then asked me to pay for a new roof. I calmly explained that I didn’t own the property anymore, and this was not my problem.

I did know about the leaks. Honestly, so what? The buyer had plenty of opportunity to look at and inspect the roof before closing – and besides, I wasn’t obligated to say anything to the buyer about the defective roof.

Then the buyer said they were going to file an ethics complaint against me. I tried to explain that this doesn’t fall under the Code of Ethics. I was the seller of my own home. I wasn’t acting on behalf of others as a “Realtor” in this transaction, so I wasn’t bound by the Code of Ethics.

Please give me the words I need to explain this to the Realtor-buyer. Thank you – Not Bound

Dear Not Bound: Thank you for reaching out. This is a very important concept and I’m glad you’re seeking education. However, you’ve asked me to educate the buyer, when, candidly, it sounds like you are the one who needs the education.

Stay with me, okay? Let’s think this through and see what sections of the Code of Ethics might apply to your situation. (Note: Other laws may apply, but for this Dear Shannon article we’re focusing only on the Code of Ethics.) First, let’s look at relevant parts of Article 2 and then we’ll focus on Article 1, specifically Standard of Practice (SOP) 1-1.

Article 2 says “Realtors® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. Realtors® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law. (Amended 1/00)

Let’s focus on the first part of Article 2, “Realtors® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.” First, notice the word “shall.” This indicates it’s not a mere suggestion. Second, a defective roof and leakage during heavy rain is clearly a pertinent fact about the property. Third, in your sale, you knew the roof was defective and didn’t tell the buyer. Keeping the defective, leaky roof a secret IS concealing a clearly pertinent fact about the property. So far, it seems like Article 2 applies.

Not done with Article 2 yet. Finally, examine the language of the first part of Article 2 again and notice it says, “Realtors shall avoid concealment of pertinent facts relating to the property.” This Article expressly applies to Realtors. And in your scenario, both you and the buyer are Realtors. So, certainly, Article 2 applies to your situation because you are a Realtor. Despite this, you contend that because you were the seller in the transaction, not acting on behalf of others, that you were not subject to the Code of Ethics.

Now, let’s look to SOP 1-1 to see if we can get clarity on the distinction you are trying to make. Notice we’re going to an entirely different Article for our answer. [Standards of Practice serve to clarify the ethical obligations imposed by various Articles.] Under Article 1, SOP 1-1 is on point for your situation.

SOP 1-1 states: “Realtors®, when acting as principals in a real estate transaction, remain obligated by the duties imposed by the Code of Ethics. (Amended 1/93)

There it is in plain language. This should relieve you of any doubt.

You were selling your own property, and SOP 1-1 says you’re still obligated by the duties imposed by the Code. And under the Code, Article 2 says “Realtors® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.”

Unfortunately, you wrongly thought it was okay to keep quiet about the defective roof. If the Realtor who bought your property follows through and files an ethics complaint, this is likely going to be an issue for you under both Article 1 and 2 of the Code of Ethics.

Shannon Allen is an attorney and Florida Realtors Director of Local Association Services
Note: Information deemed accurate on date of publication

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