Part Three(c) of Five: Unrepresented Buyer Disclosure

This article and frequently asked questions (FAQs) is part three “c” (3c) of a five part series that will introduce the forms prior to their publication on August 1, 2024.

The new Unrepresented Buyer Disclosure can be found here. The form was primarily drafted to ensure that the buyer: (i) understands that the seller’s agent does not represent their interests in the transaction; and (ii) acknowledges the fact that they have knowingly chosen not to be represented in the transaction despite their ability to hire an agent to represent their interests.

Lines 1-5 identify the buyer, the seller, the seller’s broker and their agent(s), and the property address that is the subject of the transaction.

Lines 6-8 states that the seller’s broker has informed the unrepresented buyer of their right to hire a buyer broker who would represent only them but instead has elected not to be represented.  The unrepresented buyer then acknowledges five (5) items:

Item (a) Representation– Discloses that the seller’s broker only represents the seller and not the unrepresented buyer.  Furthermore, it warns the unrepresented buyer that the seller’s broker may provide them transaction documents and conduct other activities to accomplish a sale, but those activities are provided for the sole benefit of the seller, not the unrepresented buyer.

Item (b) Real Estate Agency Disclosure and Election Form (READE)– Suggests that the unrepresented buyer review and sign the READE form acknowledging that the seller’s broker only represents the seller.

Item (c) Fiduciary Duties to Seller– Discloses that the seller’s broker has a fiduciary duty to the seller of loyalty, obedience, disclosure, confidentiality, and accounting.  It also warns the unrepresented buyer “should not” disclose any confidential information because the seller’s broker is obligated to share that information with the seller.

Item (d) Fair Dealings– Discloses that the seller’s broker will be honest and deal fairly with the unrepresented buyer.  However, these duties to the unrepresented buyer “does not” include giving advice to the unrepresented buyer on how they should protect their own interests, provide interpretation of contract terms, or notify the unrepresented buyer of deadlines.  Finally, the unrepresented buyer acknowledges that the seller’s broker has not verified statements of the seller and is not responsible for the seller’s representations.

Item (e) Due Diligence– The unrepresented buyer acknowledges that it is their responsibility to protect their own interests and should hire their own professionals to advise them in the transaction.  Finally, it confirms that the unrepresented buyer assumes all risk should they choose not to hire professionals to assist them in purchasing the property.

FREQUENTLY ASKED QUESTIONS

Q1. Why was the Unrepresented Buyer Disclosure (Disclosure) drafted?

A1. Given the practice changes, some buyers may choose to be unrepresented in a transaction.  In such circumstances, an unsophisticated buyer may wrongfully believe the seller’s broker will protect the buyer’s interests.  The form was drafted to clearly inform the buyer that it is their sole responsibility to protect their own interests and includes specific examples.  The form also helps avoid the seller’s broker’s unintended implied agency to the buyer by making it abundantly clear that the seller’s broker only represents the seller.

Q2. Why is the term “seller’s broker” used instead of listing broker?

A2. The workgroup wanted to make sure the buyer understood the disclosure and therefore used terms that would be more familiar to the public, removed sophisticated language, and kept it simple and short.

Q3. Does use of this Disclosure form guarantee the seller’s broker will not be sued by the buyer?

A3. Unfortunately, no form is fully “bulletproof” and anyone can file a lawsuit, even if it lacks merit.  Best practice is for the seller’s broker to have the unrepresented buyer sign the Disclosure and reiterate their sole allegiance to the seller throughout the transaction.

Q4. What if the unrepresented buyer refuses to sign the Disclosure?

A4. The seller’s broker cannot force the unrepresented buyer to sign the Disclosure.  Best practice would be to deliver the Disclosure to the unrepresented buyer and document the delivery and fact that the buyer refused to sign.

Aaron M. Green, Esq., a licensed Arizona attorney, is the General Counsel for the Arizona Association of REALTORS®.  This article is of a general nature and reflects only the opinion of the author at the time it was drafted.  It is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.