The duty of disclosure means telling the principal everything of importance the agent knows or learns about the object of the relationship. Normally, the object of the relationship is buying or selling property. The agent must tell their principal everything they know that may be of importance or even of interest to the client in making the decision to buy or sell.
The agency duty of disclosure to one’s own client is much broader than the duty to disclose latent material facts. This can cause confusion for agents. For instance, Oregon law declares certain things, like a death on the property, not to be material in a real estate transaction. An agent with such information could not hide the information from their own client and would still have to disclosure it if it was apparent the information was important to their client.
Disclosure to the client is the only way an agent can deal with conflict of interest situations. Not only must an agent disclose such situations to the client but the disclosure must be a full and fair disclosure in language the client can understand. The duty to fully and fairly disclose can create very difficult situations for agents. Of these difficult situations, none is more potentially difficult than buying your own listing.
Purchasing your own listing creates a conflict of interest because, as the buyer, the agent’s interests are directly opposed to the seller’s. The safest and simplest way to resolve this conflict is to dissolve the agency relationship and advise the seller to seek representation elsewhere. Although safe and simple, this is almost never done in real life. It is not done because agents believe they must continue to represent the seller in order to get a commission and they want the commission to help fund the purchase.
Unfortunately for agents, the duty of full and fair disclosure can make it very difficult for a listing agent who wants to purchase their client’s property to continue to represent the seller. Because the agent will be on both sides of the deal, an agent purchasing their client’s property can continue to represent the seller only if the seller agrees to the dual representation after full disclosure. The disclosure, to be considered full and fair, would have to include the fact that no commission would be due the agent if the seller refused to allow the dual agency. It is for that reason that negotiating the price directly, based on the anticipated commission savings from dissolving the agency relationship, is a much better approach than trying to continue the relationship and taking the commission.
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