11.4 Agency Disclosure Rules

11.4 Agency Disclosure Rules

Agency disclosure rules are designed to remove confusion about who the agent represents in a transaction.
In many states, disclosure isn’t just a best practice—it’s required by law. The goal is to make sure clients and customers understand
the agent’s role, what duties are owed, and what choices they have for representation.

Objectives of Disclosure

• Notify clients and customers who the agent represents (and who the agent does not represent).
• Explain the fiduciary duties and standards of care the agent owes to each party.
• Inform parties that they have options in how they are represented (seller agent, buyer agent, dual agent, facilitator, etc.).
• Obtain acknowledgement and acceptance of the disclosure (often in writing).

Disclosure requirements generally apply whenever there is a transfer of a real estate interest (sale, exchange, lease, assignment, sublease,
and even partial interests like air rights or subsurface rights).

Seller Agent Disclosures

• To the client (seller/owner): The agent typically must disclose the meaning of the agency relationship in writing before the listing agreement is executed.
• To the customer (buyer/tenant): The listing agent must disclose in writing that they represent the owner—usually before or at the first substantive contact.
• Oral disclosure: If written disclosure isn’t feasible (for example, on the phone), the agent may disclose orally and then provide written disclosure at the first face-to-face meeting.

What Counts as “Substantive Contact”?

While state rules vary, substantive contact often includes situations where the agent is:

• Showing a property to the prospect
• Eliciting confidential information about needs, motivation, or financial qualification
• Executing a contractual offer to buy, sell, or lease

Some interactions may be excluded (depending on state rules), such as basic “small talk,” answering factual questions about an advertised property,
or hosting an open house as long as the agent does not move into substantive contact.

Buyer Agent Disclosures

• To the client (buyer/tenant): The agent should disclose the meaning of the agency relationship in writing before the representation agreement is executed.
• To the seller or seller’s agent: The buyer agent must disclose the agency relationship on first contact (substantive contact is generally assumed).

Dual Agent Disclosures

• Informed written consent: A dual agent must obtain written consent from all parties.
• Confirm in later documents: Subsequent contracts often confirm the disclosure.
• Limits on what can be shared: Dual agents are typically prohibited from disclosing certain information unless authorized, such as:
  • That the seller will accept less than list price
  • That the buyer will pay more than offered
  • Motivations of either party
  • Willingness to accept different financing terms

Facilitator (Transaction Broker) Disclosures

• Disclosure rules for a facilitator are often similar to dual agency disclosure.
• The agent must provide written notice to all parties (or their agents) either:
  • when the agent becomes a transaction broker, or
  • at the first substantive contact—whichever happens first.

Check-In Questions

• 1) What is the main purpose of agency disclosure?
  To increase the agent’s commission
  To remove confusion about who the agent represents
  To eliminate the need for written contracts
  To prevent inspections from being ordered
  Show Answer

  Correct Answer: To remove confusion about who the agent represents
• 2) When must a listing agent typically disclose to a buyer that the agent represents the seller?
  After closing
  Before or at the first substantive contact
  Only if the buyer asks
  Only when an offer is accepted
  Show Answer

  Correct Answer: Before or at the first substantive contact