A neighbourhood acquaintance, who happens to be a real estate salesperson, said they’d like to buy my home when I mentioned I was interested in selling. Is this allowed?
While your question is straightforward, the answer is a little bit complicated.
Certainly, real estate salespeople can purchase a home on their own behalf. After all, they are consumers, too, and they can either buy or sell a home — for their personal use or as an investment — just like anyone else.
However, when they do so, it may create a conflict of interest. To manage the issues that arise from the conflict, and to be transparent, you can expect the salesperson to make a number of disclosures, in writing, of any interest that they or a person related to the salesperson may have in the property. As well, there must be included a statement that they are a real estate salesperson, and any applicable factual items pertaining to the purchase.
The meaning of “related” and the disclosure obligations are defined in the Code of Ethics under the Real Estate and Business Brokers Act, 2002 (REBBA).
Real estate professionals may have a direct interest in a property if they either own or partly own the property that is being sold, or if they are the person interested in buying a property.
A real estate professional may also have an indirect interest in a property. This includes when they are either related to, or have a business relationship with, the person selling or buying a property.
Therefore, they must make written disclosures to you or your real estate representative as soon as possible, and before any offers to you are presented or considered.
What can you expect in terms of written disclosure?
- Brokerages, brokers and salespersons will disclose in writing to buyers and sellers any interest in a property that the salesperson, broker or anyone related to them has in a property.
- Salespersons and brokers are also to disclose in writing to their own clients any direct or indirect financial benefit, including referral fees from other brokerages, that they may receive from another person.
- Salespersons and brokers who buy or sell properties for their own use are also to disclose in writing to the buyer or seller that they are a real estate salesperson and by virtue of their industry knowledge anything that could affect the value of the real estate. For example, if a salesperson buys a property with the intention to renovate or flip it, or knows of a future development (such as the addition of a nearby transit stop) that may affect the value of the property, the salesperson must disclose this information to the buyer or seller.
Meanwhile, you are also encouraged to work with a real estate brokerage to support your best interests in the transaction. As well, the counsel of an experienced real estate lawyer, who can advise you best about the disclosure requirements of your neighbourhood acquaintance, would also be wise.
If you have a question for Joe about the home buying or selling process, please email email@example.com.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.