Conflicts of Interest

There are often inherent conflicts in a real estate setting, such as buyers bidding against buyers or sellers pitted against a buyer who has an issue with an unfulfilled contract. There are other more subtle and possibly more harmful conflicts though, conflicts of interest. What I’m talking about is a situation where someone may be benefitting from the consumer without disclosing that they are receiving that benefit.

Here are a few examples; let’s say that a Realtor® influenced a seller to use a certain handyman service, but failed to disclose that they had part ownership in the handyman company or that the handyman was a close relative. Assuming that all of the players involved were totally honest, this may never be a problem, but there exists the possibility for unethical activity to occur. Would the seller have the same level of comfort in that referral if they knew that the Realtor® was receiving a kickback from every job referred? Maybe not. Another example is when Realtors® influence consumers to use a title company or in-house-lender in which the owner of the real estate office is a stake holder or outright owner.

Some years ago the legislature passed a bill that required Realtors® who were referring home inspectors to use an addendum that basically says, “Washington State law requires brokers who refer a home inspector whom the broker has a current or past relationship including, but not limited to, a business or familial relationship, fully disclose in writing to the buyer or seller the nature of the relationship.” In other words, they must fully disclose a previous relationship with that inspector, even if it was just a repeated business relationship. Of course consumers want the advantage of vetted vendors who can be trusted, but disclosure of a cozy relationship with any vendor would at least allow the consumer to judge for themselves.

The Realtor® Code of Ethics states that “Realtors® shall not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties.” This sentence addresses a growing trend in our business concerning real estate companies who aggressively advertise that they will purchase your home if it does not sell in the allotted time. It also applies when an individual Realtor® has interest in purchasing a property for their residence or for investment purposes. Clear disclosure is required in each of these circumstances.

Jim Palmer, Jr.
509-953-1666
www.JimPalmerJr.com

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