When does a listing agent need to disclose their familial relationship with the seller?
QUESTION: Does a listing agent who is related to a seller-client in a transaction have to disclose their relationship? I know this is a Code of Ethics issue, but I have been asked whether it is also required under North Carolina law. If disclosure is required, is putting a note in the MLS sufficient?
ANSWER: Article 4 of the Code of Ethics provides that when a REALTOR® sells property they own or have “any interest” in, they “shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative.” This means that if a listing agent has some kind of interest in a seller-client’s property by virtue of their relationship with the seller, disclosure is required.
The case interpretations of Article 4 provide guidance on what it means for a REALTOR® to have “any interest” in a property. In Case #4-3, a hearing panel found that a listing agent violated the Code of Ethics by failing to disclose to his seller-client that the buyer was the listing agent’s father-in-law. The panel concluded that since the listing agent could potentially acquire an interest in the property by way of inheritance, then the client should have been informed of the listing agent’s relationship to the buyer.
We believe the same reasoning applies here. If a listing agent represents a seller and has any interest in the seller’s property by reason of inheritance or other means, then the listing agent has a duty to disclose their relationship to prospective buyers.
There is no correlating North Carolina Real Estate Commission rule or other North Carolina law that specifically requires disclosure to the buyer of a listing agent’s family relationship. There is also no rule mandating that the disclosure be made in the agency agreement or contract. However, agents should note that N.C.G.S. § 93A-6 does, more broadly, prohibit a broker from misrepresenting material facts and “[a]cting for more than one party in a transaction without the knowledge of all parties for whom he or she acts.”
If an agent has an interest in one of their listed properties by virtue of their relationship with the seller, Standard of Practice 4-1 of the Code of Ethics mandates that disclosure be made in writing prior to the signing of any contract. Disclosure in the MLS would fulfill the requirements of Article 4 and Standard of Practice 4-1, assuming the buyer or their agent has access to the MLS. However, in cases where a buyer may not have access, disclosure should be made in a separate writing, such as an email, prior to the signing of the contract.
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