Disclose Family Interest: Does In-Law Count?
The Code of Ethics and Arbitration Manual (Manual) doesn’t list mother-in-law as a relationship that Realtors must disclose. Yet, after my mother-in-law submitted the highest offer on a property and it was accepted, the seller later filed an ethics complaint alleging that I should have disclosed our relationship. Was I wrong?
Dear Shannon: I’m a listing broker and listed a home. I presented the seller with three offers from three different buyers, though all were below the listed price. I advised the seller to accept the offer from the buyer who presented the highest of the three offers. In my opinion, this price was a fair market price.
After closing, I was shocked to hear the seller filed an ethics complaint against me because I didn’t tell them that the buyer was my mother-in-law. And the seller said my ‘strong urging’ persuaded the seller to accept an offer below the listed prices. The seller claimed I acted more in the interest of the buyer than in the interests of the seller.
I know the Code of Ethics, and since my mother-in-law is not an immediate family member, I don’t think I had to disclose this to the seller. I’m surprised by the accusation that I didn’t act in the best interest of the seller because I always promote the interests of my sellers. Can you back me on this one? Just want to make sure I’m Doing the Right Thing.
Dear Doing the Right Thing: I’m glad you reached out. It sounds like you truly thought you were doing what was allowed under the Code. Unfortunately, however, I cannot back you up on this one. Thank you for the opportunity to provide some education on where I think you (and maybe others) may have misunderstood the Code. Let’s look at sections of the Code of Ethics and Arbitration Manual (Manual) that seem to apply to this situation:
Article 4 is relevant here and states:
REALTORS® who have a present ownership interest in property for sale or lease, or contemplated interest to purchase or lease property, must disclose in writing the existence of such interest to all parties to the transaction prior to a party signing any agreement. (Amended 1/25)
Remember Standards of Practice (SOPs) serve to help interpret the Articles. Let’s take a look at SOP 4-1 (bolding for emphasis)
The present ownership interest in property for sale or lease, or contemplated interest to purchase or lease property, includes transactions in which REALTORS®:
1) represent themselves
2) represent a member of their immediate family
3) represent their firm or any broker or agent thereof
4) represent an entity in which the REALTOR® or member of their immediate family has a legal interest. (Adopted 2/86, Amended 1/25)
You said you know the Code and your mother-in-law is not an immediate family member, so you didn’t think you had to disclose this to the seller. Sounds like you may be referring to where “immediate family” is defined in the Manual relating to ethics. Part One – Ethics General Provision, Section 1. Definitions Relating to Ethics, subsection (l) states:
“Immediate Family” as used in the Code of Ethics includes, but is not limited to, the Realtor® and the Realtor®’s spouse and their siblings, parents, grandparents, children (by birth or adoption), grandchildren, and other descendants. (Adopted 11/89)
You are correct that mother-in-law is not expressly included in the list of immediate family Notice, however, the language says, “includes, but is not limited to.” The “not limited to” language means the definition of immediate family is not limited to just the short list provided. If you read the definition and concluded that mother-in-law is excluded because it’s not expressly included, then it may be an unfortunate misread of the language.
Let’s further analyze SOP 4-1 (bolding for emphasis)
The present ownership interest in property for sale or lease, or contemplated interest to purchase or lease property, includes transactions in which REALTORS®:
1) represent themselves
2) represent a member of their immediate family
3) represent their firm or any broker or agent thereof
4) represent an entity in which the REALTOR® or member of their immediate family has a legal interest.(Adopted 2/86, Amended 1/25)
Notice the language expressly includes in the test of SOP 4-1; “The present ownership interest . . . or contemplated interest . . . includes transactions in which REALTORS® . . . represent an entity in which the REALTOR® . . . has a legal interest.”
Clearly, if you were presenting offers from an entity in which you had any ownership interest you would have had to tell the seller. Let’s think this through and follow this concept to its logical conclusion.
Here there’s a possibility, even if remote, that you will acquire an interest in this property by inheriting it from your mother-in-law. Since the interest in property created through a family relationship can be closer and more tangible than through a corporate relationship which is expressly cited in SOP 4-1 as an interest requiring disclosure, then Article 4 requires disclosure to the seller that the buyer was your mother-in-law.
You should have put something in writing to the seller before you presented the offer from your mother-in-law. Keeping this information from the seller was contrary to the spirit and intent of Article 4.
Inspired by Case #4-3: Disclosure of Family Interest. Other laws and rules apply.
Shannon Allen is an attorney and Florida Realtors Director of Local Association Services
Note: Advice deemed accurate on date of publication
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