Having a buyer for a client’s property isn’t what most agents would deem a problem, but issues can arise when the buyer or one of their family members is the agent.
So, what exactly are the legal requirements for real estate agents in this situation and what are some of the challenges that need to be managed?
Braden Walters, Principal at Belle Property Byron Bay/Lennox Head and REINSW Residential Sales Committee Chairperson says it’s important for an agent in this scenario to be open and honest with a vendor.
“The biggest issue a sales agent may face is the loss of transparency and reputation around clients questioning your motives for the sale,” Walters says.
“You need to tell the vendors right away. The more you are honest and transparent, the less the vendor will feel uneasy about it. The vendor [needs to be told they] can reserve the option to sell the property to whomever they like.”
Walters says if a family member is interested in buying the property then the agent could offer to hand the listing to another agent in the same office to avoid any perceived conflict issues.
From a legal perspective, real estate agents in NSW are required to comply with the Property Stock and Business Agents Act 2002 (NSW) Section 49 which outlines restrictions on agents obtaining a beneficial interest in a property.
Sarah Bester, General Manager, Ray White – Double Bay, and REINSW Residential Sales Committee Deputy Chairperson, explains further the agent requirements under the Act.
“Section 49 of the Act requires written disclosure to the vendor of the property, outlining the nature of the relationship you have with the purchasing party, prior to them entering into a Contract for Sale,” Bester says.
Bester says when an agent or their family member purchases a vendor’s property there can also be perception issues that need to be managed through open communication.
“[It’s best practice] to make it known to the vendor that there is a relationship right back at the beginning of there being an interest; that way it's not a last-minute disclosure at auction or exchange which is more likely to be met with suspicion.”
Betty Ockerlander, Partner at McGrath Epping, and REINSW Residential Sales Committee Member says her approach would be to avoid the scenario all together.
“I have heard many stories from both vendors and purchasers, and they feel there is a conflict of interest [in these situations],” Ockerlander says.
“I would not put myself in this situation, especially if I wanted to purchase a home that I appraised. I would disclose that I am interested and recommend that the vendor list with another agent. I want all my transactions to be at arm’s length and also to appear that way at all times.”
Generally, if an agent or their family member wishes to purchase a vendor’s property, it is up to the individual agent whether they pursue the opportunity or how they otherwise manage it.
What is critical is that all legal requirements are met, and the agent is open and transparent with the vendor from the outset.
Click here to download the template for Section 49 disclosures.
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