4 Things You Didn’t Know To Disclose


This article was featured in the September/October 2016 issue of Austin REALTOR®. Read the full article here.

Accepted Offers

The Code of Ethics requires disclosure of accepted offers. Standard of Practice 3-6 provides a well-defined standard on this: “REALTORS® shall disclose the existence of accepted offers, including offers with unresolved contingencies, to any broker seeing cooperation.”

This Standard of Practice was amended several years ago to add the phrase “including offers with unresolved contingencies.” That makes it clear that, regardless of the nature of the accepted offer or type of contingency—short sale, buyer’s property sale, or other—the offer must be disclosed to brokers when they seek cooperation.

REALTORS® should distinguish this ethical standard from the rules of their MLS. Local MLS rules may or may not require the chance of a listing’s status when an offer is accepted. It is possible that MLS rules may not require the disclosure of an accepted offer in the MLS, but the ethical requirement of Standard of Practice 3-6 requiring disclosure still applies to a listing broker when a cooperating broker seeks cooperation on the listing.

Accepted Offers Must Be Disclosed - NAR 9/2012


Article 2 of the Code of Ethics requires REALTORS® to avoid “exaggeration, misrepresentation or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however be obligated to discover latent defects in the property.”

The Code of Ethics and Arbitration Manual discusses “pertinent” facts: “Absent a legal prohibition, any material fact that could affect a reasonable purchaser’s decision to purchase, or the price that a purchaser might pay, should be disclosed…if known by the REALTOR®.”

So for example if a neighbor’s fence cuts into a seller’s lot, that is an encroachment. The encroachment clearly may affect that a reasonable buyer may decide to purchase in that the title to the property has some “flaw” or “cloud.” The encroachment may also affect the buyer’s ability to sell the property in the future unless the encroachment is resolved.

Unless the seller can work with the neighbor to resolve the problem, that encroachment is likely a pertinent fact that should be disclosed to a prospective buyer and in a seller’s disclosure statement, whether the disclosure statement is required by law or by practice. Even if the encroachment is considered “minor,” it may be still considered pertinent by a hearing panel in an ethics complaint. As in any question of disclosure, the best practice to stay within the Code is “when in doubt, disclose.”

Disclose Encroachment - NAR 5/2014

Referral Fees

REALTORS® are required to disclose any financial benefit received as a result of recommending real estate services to customers. Article 6 of the Code says “When recommending real estate products or services (e.g. homeowner’s insurance, warranty programs, mortgage financing, title insurance, etc.), REALTORS® shall disclose to the client or customer to whom the recommendation is made any financial benefits or fees, other than real estate referral fees, the REALTOR® or REALTOR®’s firm may receive as a direct result of such recommendation.”

Equally important to distinguish is the type of product or service being recommended. If it’s a real estate settlement service like title insurance or mortgage financing, the federal Real Estate Settlement Procedures Act prohibits the real estate agent from receiving any referral fee, kickback, or “thing of value” for recommending the use for the settlement service provider. Recommendation of a contractor to do repair work is not covered by RESPA, since repair isn’t a settlement service, But Article 6 of the Code still applies if the service can be considered a “real estate product or service.”

Disclose All Contractor Fees – NAR 10/2011

Ownership Interest

The Code of Ethics has requirements for disclosure of personal interest when buying or selling. The Code addresses personal interest disclosure in Article 4: “REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof… without making their true position known to the owner or the owner’s agent or broker.”

The article goes on to say that when REALTORS® are selling property that they own, or in which they have any interest, they shall reveal their ownership or interest in writing to the buyer or the buyer’s representative. Standard of Practice 4-1 requires that this disclosure be in writing and be “provided by REALTORS® prior to the signing of any contract.”

One good way to make your position known so buyers will be alerted to it prior to signing a contract is to write a disclosure of ownership interest in the MLS public remarks for the property. State license laws may also require disclosure in or along with the sales contract.

As far as whether the disclosure must appear in advertising materials, there is no requirement in the Code. But Standard of Practice 12-5 requires that the name of the firm appear in such advertising in a “reasonable and readily apparent manner.”

If the property is available for rent, your obligation to disclose is covered under Standard of Practice 12-6. 

How to Disclose Ownership Interest – NAR 3/2011


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