Real Estate Agency and Disclosure PDF

Agency and Disclosure Agency Disclosure Requirements: Agency Disclosure A real estate broker or salesperson must provide a client involved in the sale or purchase of real estate with an agency disclosure form at the first substantive contact. The ag...

Agency and Disclosure Agency Disclosure Requirements: Agency Disclosure A real estate broker or salesperson must provide a client involved in the sale or purchase of real estate with an agency disclosure form at the first substantive contact. The agency disclosure form should provide a description of the available agency relationships. The agency disclosure form should provide a description of the role of a licensee under each agency relationship option. The agency disclosure form must provide a signature line for the acknowledgment of receipt by the client. Agency Disclosure Form Agency disclosure is required by law for any transaction involving property occupied, or intended to be occupied, by up to 4 families as their residence. The agency disclosure must be in substantially the form as set out in Minnesota Statute 82.67, Subd. 3, that can be found here. The 5 types of agency representation available are: Seller’s broker. Subagent. Buyer’s broker. Dual agency broker. Facilitator. Seller’s Broker A seller’s broker is a licensee who acts on behalf of the seller. A seller's broker owes his or her fiduciary duty to the seller. A seller's broker must disclose to the buyer any material facts that the brok er is aware of. A seller's broker must tell the seller any information disclosed to him or her buy a buyer, except confidential information acquired in a facilitator relationship. Subagent A subagent is a licensee who represents the seller but works with a buyer when the buyer is a customer. A subagent must act in the seller's best interest. 1  A subagent must tell the seller any information disclosed to him or her by a buyer customer. A buyer customer is not represented by the subagent and therefore will not receive advice and counsel from the broker or salesperson. Buyer’s Broker A buyer’s broker is a licensee who represents the buyer. The broker may only represent the buyer, even if he or she is being paid in whole or in part by the seller. A buyer's broker owes his or her fiduciary duty to the buyer. A buyer’s broker must disclose to the buyer any material facts that the broker is aware of. A buyer’s broker must tell the seller any information disclosed to him or her buy a seller, except confidential information acquired in a facilitator relationship. Dual Agency Broker A dual agent is a licensee who represents both the seller and the buyer in the same transaction. Dual agency also occurs when two salespersons licensed to the same broker each represent a party in the same transaction. Dual agency requires the informed consent of all parties involved. A dual agent owes his or her fiduciary duty to the seller and the buyer. A dual agent owes the same duties to the seller and the buyer. A dual agent may not act exclusively for either party and is therefore limited on the level of representation he or she can provide. A dual agent must remain impartial and may not advocate for one party to the detriment of the other. A dual agent must disclose to the buyer any material facts that the broker is aware of. Facilitator A facilitator is a broker or salesperson who performs services for a buyer, a seller, or both, but does not act on the behalf of either as a buyer's broker, seller's broker, or dual agent. A facilitator does not represent the buyer or seller in a fiduciary capacity. A facilitator owes the duty of confidentiality to a party but owes no other duty to the party except those duties required by law or contained in a written facilitator services agreement. If a facilitator is working with a seller and shows a property listed by the facilitator broker or salesperson to a buyer, then the facilitator must act as a seller's broker. 2  If a facilitator is working with a buyer and accepts a show ing of a property by a buyer being represented by the facilitator broker or salesperson, then the facilitator must act as a buyer’s broker. Fiduciary Duties The fiduciary duties required of brokers and salespersons are: Loyalty. The broker or salesperson will act only in his or her client’s best interest. Obedience. The broker or salesperson will carry out all of his or her client’s lawful instructions. Disclosure. The broker or salesperson will disclose to his or her client all material facts of which the broker or salesperson has knowledge that might reasonably affect the client's use and enjoyment of the property. Confidentiality. The broker or salesperson will keep his or her client’s confidences unless required by law to disclose specific information. Reasonable Care. The broker or salesperson will use reasonable care in performing his or her duties as an agent. Accounting. The broker or salesperson will account to his or her client for all the client’s money and property received as an agent. Creation of Dual Agency If circumstances create a dual agency situation, the broker must make full disclosure to all parties about the change in relationship of the parties to the broker due to dual agency. Having made full disclosure, the broker must obtain the consent of all parties to these circumstances. The consent must be substantially in the form as set out in Minnesota Statute 82.67, Subd. 4, that can be found here. Other Disclosure Requirements: Disclosure by Agents of a Broker A salesperson may not engage in real estate independently. A salesperson must be under the licensed name of a broker to conduct real estate business. An individual broker may not engage in real estate independently. An individual broker may only engage in real estate under a brokerage’s licensed name. A broker licensed to a business entity may only conduct business under the licensed business entity’s name. 3  A licensee must disclose the licensed name of the brokerage under whom the licensee is authorized to conduct business before the negotiation or consummation of a real estate transaction. Disclosure of Financial Interests If a licensee wishes to purchase or acquire an interest in a property, the licensee must disclose to the to the owner: That the licensee is a real estate broker or agent salesperson. In what capacity the licensee is acting. Material Facts Licensees must disclose to a prospective buyer all material facts of which the licensee is aware. A material fact is: A fact that could adversely and significantly affect a buyer’s ordinary use or enjoyment of a property. A fact that could adversely and significantly affect a buyer’s intended use of the property. Exemptions to what is considered a material fact include: The property is or was occupied by someone who is, or was suspected to be infected with HIV, or is or was diagnosed with AIDS. The property was the site of a suicide or death. The property is or was the site of perceived paranormal activity. The property is located in a neighborhood containing any adult family home, community-based residential facility, or nursing home. Licensees do not have to disclose information regarding persons who are required to register as a predatory offender, provided the broker or salesperson provides written notice that information about the predatory offender registry and persons registered with the registry may be obtained by contacting local law enforcement or the Department of Corrections. Licensees do not have to disclose information regarding airport zoning regulations, provided the broker or salesperson provides written notice that a copy of the airport zoning regulations can be reviewed or obtained at the office of the county recorder. Licensees are not required to disclose information relating to the physical condition of the property if a written report that discloses that information has been prepared by a qualified third party and provided to the person to whom disclosure is being made. A qualified third party is: A federal, state, or local governmental agency. 4  A person with the expertise meeting the standards of practice for the inspection or investigation being conducted. Licensees must disclose to the parties in a transaction any f acts known to the broker or salesperson that contradict any information included in a written report. Nonperformance by a Party in a Transaction If a licensee is notified by a party in a transaction that the party will not perform according to the terms of a purchase agreement, the licensee must: Immediately disclose to any other parties the fact of the party's intent not to perform. Guaranteed Sales Programs A guaranteed sales program is an agreement in which a broker undertakes to buy a property if he or she cannot sell it within a specific timeframe. A broker advertising or offering a guaranteed sale program, or similar program, must provide to the seller prior to the execution of a listing agreement: A written disclosure that states the terms and conditions under which the broker agrees to purchase the property. The disposition of any profit at the time of resale by the broker. 5