Real estate brokers help to create successful transactions for their clients, but they often participate in their own transactions, too. This may include buying or leasing a primary residence, the purchase or sale of investment property, etc.
When an Illinois licensed real estate broker engages in a transaction, there are special disclosure requirements that can be easily overlooked. In general, these requirements are in place to ensure that the other party in a transaction is aware of the licensee’s status – because the licensee is perceived to have more knowledge and therefore may be able to take advantage of the other party.
Failure to disclose that you are a licensee is a violation of license law that may expose you to penalties up to and including revocation of your license.
- Disclosure must be made to all parties when a licensee is selling, leasing or purchasing any interest in real property.
Disclosure must be made in writing.
- You may do so when you first meet or interact with the other party or include the disclosure as part of your written offer.
- If you include the disclosure on a contract that you submit, avoid adding a small note next to your signature (on the last page). In the past, the IDFPR has suggested that licensees add the required text in large/clear print at the top of the contract to ensure that the receiving party sees it before they review and sign the contract.
Disclosure requirements apply to the following parties:
- Sole owners.
- Joint tenants and tenants by the entirety.
- Land trusts.
- General partners in a partnership.
- Officers, directors, majority shareholders and controlling shareholders of a corporation.
- Managers or majority or controlling members of a limited liability company.
- Anyone else with a direct or indirect interest in the subject property.
It’s noteworthy that licensees often get into trouble when a business entity is involved in the transaction. It’s critical to remember that brokers must disclose their status even when they are not personally a party to the contract. For example, Happy Investments LLC may be the buyer, but if Lucy Licensee is a manager of that LLC, she must still make the required disclosure.
Lastly, although it’s not required by law, it never hurts to also communicate orally to help ensure the other party has received your notice. You may even consider asking for a written acknowledgement of the disclosure.
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