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Real Estate Agency Disclosures in Connecticut

Instructor: Eileen Cappelloni

Eileen worked for the Orange County Asssociation of Realtors for 31 years. She has written real estate courses and exams for other publishing companies

This lesson will discuss Connecticut's real estate agency disclosures, including general disclosures to all parties, non-material disclosures that need to be made, and disclosures of conflicts of interest in real estate transactions.

Disclosure Notice

Connecticut residents Joanna and Manuel are interested in listing their house for sale, so they go to Sterling Real Estate Company and are met by Grant, a real estate agent. He invites them in and quickly produces a form that is titled Real Estate Agency Disclosure Notice. Grant explains the form and their rights and his agency's responsibilities. He notes that even if they do not choose to be represented, he is still obligated to treat them fairly and honestly. Grant also states that the form is not a contract; it is only used to explain the different relationships they may choose to have with his company.

Agency Relationships in Connecticut

Grant informs Joanna and Manuel that if they chose to become seller clients by signing a contract, he will owe them the full scope of fiduciary duties; loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality, and accountability. Joanna and Manuel's interests will be primary, and he will negotiate for the best terms and conditions in the sale of their house.

He also explains that if they also want to purchase a house, he can represent them as well and serve as their buyer agent. He will owe them the same fiduciary responsibilities as a buyer agent as he does as a seller's agent, and he will negotiate an appropriate price for them to offer on a property.

Joanna quickly asks Grant, ''What if we become interested in a house that your company already has listed?'' Grant promptly explains that if they became buyer clients and are interested in a property that his company already has listed, he can, with their permission, become a dual agent and although some of the fiduciary duties are lessened, he will still have a duty to deal with both parties fairly and honestly. In this type of relationship, a dual agent cannot expect to provide undivided loyalty, but may not reveal confidential information which might present a possible negotiating advantage to either party.

Resolving Potential Conflicts of Interest

For example, let's say Grant brings his buyer clients to Joanna and Manuel's property, who have signed a contract and are now his clients as well. The buyers appear to be very interested in making an offer of $100,000 on Joanna and Manuel's house, but Grant knows that they are willing and financially able to increase their offer to $120,000. That information is confidential to Grant but he is also aware that Joanna and Manuel will readily accept $100,000 for their house. Grant will make more money in commission if he sells it for a higher price. His interests, therefore, can present a conflict of interest. The primary reason many states do not recognize dual agency as a legal relationship is because of the potential for a conflict of interest.

Grant explains that in an effort to reduce the possibility of a conflict of interest, Connecticut allows for a designated agency, where one agent in an office is delegated to represent one party in a transaction and another agent in that same office is delegated to represent the other. Grant's company, Sterling Real Estate, is owned by the principal broker Paul, who will designate two agents in his office. Each agent will represent a client, and only Paul, as the broker/owner will become a dual agent.

Material Disclosures

The public is protected by existing laws in Connecticut that require real estate agents to disclose who they represent. In addition, sellers are required to complete a seller disclosure form that provides information on a home's features. They must also reveal any adverse material facts, which are conditions that may influence a buyer not to choose to purchase a particular property.

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