For REALTORS®, buying and selling real estate is the order of the day, but that is always as a representative helping a seller sell or a buyer buy. Realtors® need homes too though for the same reasons other consumers do since it is a place to raise a family and provide financial and relational stability, and it's also one of the greatest investments a person can make over the long term. As a former Realtor® myself, I can attest to the fact that buying or selling your own home is different than helping a consumer trade in real estate, but there are also certain things the Realtor® in this position must understand to remain on the right side of the Real Estate Act. Let’s consider some of those best practices and why they are important.
When a REALTOR® decides to buy or sell their own personal property, there is an assumption, and rightly so, that like any other red-blooded human, they will bend towards their own good rather than the good of the opposing party in the trade. The Real Estate Act and its Rules determine how an individual who is licensed under the Act is to behave in all situations including those that involve personal trades. The simple fact is that once an individual is granted a license by the Real Estate Council of Alberta, they are obligated to maintain a legislated standard of practice in all situations. A Realtor® cannot simply choose to lay aside these standards of practice to do a personal trade as if it doesn’t apply since it is their own personal real estate under consideration. There is no middle ground here, once licensed under the Act, a Realtor® must maintain proper behaviour and practice in all situations.
Since the REALTOR® is seen by the public and the courts as professionals who have expert knowledge in their field, the Real Estate Act rules in Sec. 62 specifically lays out mandatory disclosures that must be made to ensure the consumer is sufficiently clear on the situation they are getting into when a Realtor® is doing a personal trade. These rules make a differentiation between consumers who have their own Realtor®, and those who choose to be unrepresented altogether. Obviously, the reason for this difference is because when a consumer is represented by their own Realtor® they are protected by the requirements of that Realtor® to care for the client's best interest and use their experience and expertise to protect the client by providing independent information and advice. For this reason, the disclosure requirements of a Realtor® buying or selling a personal property in concert with a represented party on the other side is limited to the disclosure that they are a Realtor® and licensed to trade under the act, as well as the name of the brokerage they are registered to.
On the flip side, if the party opposite a REALTOR® who is buying or selling a personal property chooses to be unrepresented, they must be disclosed at a much higher level. The Realtor® in this scenario must disclose
To help REALTORS® meet their obligations under the Act, AREA has produced a Realtor® disclosure form as a template for either the represented or unrepresented party scenarios. This document would be completed in full and provided to the party opposite at the time of an offer/counteroffer but does not form part of that offer or counteroffer. For brokers, it is crucial to know that this document needs to form part of the brokerage file, and all brokerages should have office policies around how personal trades are managed in the brokerage, including the requirements that a brokerage has regarding any employees of the brokerage wanting to by a personal property that is represented by the brokerage, also covered by the Rules in Sec. 62(b).
One incredibly important note to make regarding representation is that a REALTOR® who is purchasing or selling their own property must never represent the party opposite as their agent. It is manifestly impossible to represent a consumer's best interests against your own, and no court in the land will ever be convinced of that in the event of a problem. The only viable options for a consumer finding themselves in such a situation is to hire their own Realtor® to represent them, or to be comfortable with the risks associated with representing themselves with some level of legal advice.
When we put all this regulatory stuff into shoe leather, the key to understanding is that a Realtor® has access to information and tools that the average consumer does not, which when entering a transaction with an unrepresented party does potentially provide an unfair advantage. For this reason, the Realtor® needs to be over-the-top transparent in their dealings with a consumer when the Realtors® personal interests are involved. The Realtor® should ensure they keep good notes, including dates and times of conversations and any disclosures they make to an unrepresented party, and immediately seek the advice of their broker or a lawyer if some wrinkle forms that the Realtor® did not expect.
Brokerage policies would determine whether a personal trade must be run through the brokerage or not, but as a best practice, I would advise all Realtors® to run their personal trades through the brokerage without exception. Although the brokerage may charge a small fee for handling the trade, the administration staff and the broker then can raise any concerns early in the process and prevent any possible blind spots the Realtor® may have in the trade, and help ensure all the proper paperwork and procedures are followed.
Provincial Practice Advisor
Bryan has many years of experience in the real estate industry including over 10 years as a former broker in the Edmonton Region.
Email: firstname.lastname@example.orgPhone: 403-209-3619