Copyright

Illinois Real Estate Disclosures: Laws & Rules

Instructor: Kyle Aken

Kyle is a journalist and marketer that has taught writing to a number of different children and adults after graduating from college with a degree in Journalism. He has a passion for not just the written word, but for finding the universal truths of the world.

This lesson explains the various regulations for disclosure of real estate transactions in the state of Illinois. Most of these disclosure laws apply to agents, while some apply to buyers and sellers of real estate property.

Distinctions and Disclosures

When it comes to buying and selling real estate in the state of Illinois, there is certain information that must be disclosed to the various parties involved. This disclosure is required by law and can come along with a great deal of paperwork for the real estate agent or broker.

Agency Disclosure

Agency disclosure is required under the Real Estate License Act of 2000. Many of the disclosures required under this Act are the same for both residential and commercial property. The major changes in disclosure come along with property management, which often involves leases for tenants who are renting rather than buying.

Types of Disclosure

The most common type of disclosure under the Real Estate License Act of 2000 is agency disclosure. This type of disclosure if required at the start of any work with a client (be it a person or entity) and discloses the designated agent who will be working on behalf of that client. When working with a buyer of property, notice of agency is required in either of the following three forms:

  • Buyer's Representation Agreement
  • Terms and Conditions of Buyer's Representation
  • Simple notice of agency to the purchaser's client

Disclosure Forms

This notice of agency is required for residential, commercial, leasehold, and rental brokerage scenarios. With leases, notice of agency can be delivered through a Property Management Agreement or with a Listing for Rent Agreement with the property owner. The bottom line for agency disclosure is that any time you are working with a client, be it an individual or entity, agent disclosure must be given at the start of the work.

Some situations require a notice of no agency as opposed to the agency disclosure. This can be when the agent is working directly with potential tenants for a lease agreement or if the agent is looking to show a property that is for sale by owner to their buying client. This notice should be given to parties that the agent has contact with but is not representing. Similar to this is a notice of ministerial acts. This method is not often used but may be used in cases like the one listed above when the agent has a buyer client and will be working with a seller who is not using representation. This can also occur in other situations in which the agent will be assisting a non-client in pre-contractual matters.

Other Required Disclosures

Agents must also disclose the amount of compensation they will be receiving for any real estate transactions under the Code of Ethics. They must also disclose any additional compensation that may come from a third party during transactions with the client. Agents are also required to disclose any special interest in a transaction. This disclosure applies to both residential and commercial property transactions. Anything that is considered a 'latent material adverse fact' or a material defect regarding a property must also be disclosed to prospective buyers. It is very important for this disclosure to be put in writing as the buyer may be required to provide proof of this disclosure at a later date.

While many states have disclosure laws for property that has housed individuals with HIV/AIDS, Illinois has a clause in its Act that protects real estate licensees from failure to disclose the fact that a prior tenant was infected with HIV or AIDS. Under the Real Estate License Act, this is considered 'psychologically impacted property.' This clause covers incidences that involve diseases as well as crimes and deaths. If a property has been psychologically affected in one of these ways, it is referred to as stigmatized property.

Dual Agency Disclosure

Disclosure of Dual Agency must be made if there will be more than one client for the agent. This requires signed disclosure for a dual agency from both parties that the agent will be working for. This disclosure must occur before the agent acts on behalf of both or either party. This requirement is to ensure that both parties will be fully informed and recognize that the agent will be acting on behalf of both. Article 15 of the Real Estate License Act of 2000 provides the assumption that both parties have full and informed consent. This is important in case an event occurs in which there may be an undisclosed dual agency. If an agent is representing two buyers that are interested in the same property, then the agent must also disclose a dual agency to both buyers. This stipulation provides either client an opportunity to choose another agent if they would like.

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