A listing broker becomes personally interested in purchasing her own listed property because she believes it is significantly underpriced. Before making an offer, what must the broker do to comply with her fiduciary obligations to the seller?
- ASimply lower her commission rate to compensate for the conflict of interest
- BResign as listing agent only after closing the purchase to avoid conflicts
- CFully disclose her licensed status, her interest in acquiring the property, and any facts affecting value, obtaining the seller's informed consent before proceeding
- DNothing extra is required, since brokers are permitted to buy any property they choose
Show answer & explanationAnswer & explanation
Correct answer: C. Fully disclose her licensed status, her interest in acquiring the property, and any facts affecting value, obtaining the seller's informed consent before proceeding
When an agent wishes to purchase property they have listed for a client, they must make full and fair disclosure of their dual capacity as both agent and buyer, along with any facts affecting the property's value that they know as an expert, and obtain the client's fully informed consent before the transaction proceeds. Failing to do so violates the fiduciary duties of loyalty and full disclosure.
Why the other options are wrong
- A. Incorrect; adjusting commission does not resolve the underlying disclosure and consent obligations.
- B. Incorrect; disclosure and consent must occur before, not after, the purchase closes.
- D. Incorrect; brokers face heightened disclosure duties precisely because of their expert position and conflict of interest.
Agent Self-Dealing (Buying Own Listing)
When an agent wants to personally purchase a property they have listed, they must fully disclose their dual capacity and any known facts affecting value, then obtain the client's informed consent before proceeding.
- Failure to disclose is treated as a serious breach of fiduciary duty.
- Disclosure must occur before the transaction, not after.
- Agent's expert knowledge of value must be shared, not exploited.
Memory trick: When the agent becomes the buyer, secrets must become disclosures.