By Dale Carlton, CRS
REALTORS® everywhere have been taught to be cautious and avoid liability when representing a client.
As a result of this caution, we have told REALTORS® not to give legal advice because they are not attorneys, not to give tax advice because they are not accountants, and not to give financial advice because they are not lenders. This leaves open the question, what do REALTORS® do for their clients? Are they there only to help people find homes, or do they go beyond this and become the real estate professional for their clients, helping them through many different areas during a real estate transaction? Most everyone agrees that REALTORS® are there to be the real estate professional, and therefore need to find the best way to help their clients with legal, tax and financial issues that may be encountered during a transaction. Do not misunderstand: REALTORS® are not attorneys, accountants or lenders, but they are the guide for their clients to know when they may need the help of an attorney, accountant or lender.
Identifying potential issues
Therefore, it will be necessary for REALTORS® to educate themselves with a general understanding of the legal, tax and financial implications that may be encountered during a real estate transaction. By recognizing the issues, a REALTOR®—without acting in the shoes of the other professionals—can direct their clients to the appropriate professional when an issue arises. For instance, a REALTOR® who recognizes a scenario in which selling a property to someone on their death bed might increase the tax liability of the property may advise the client that what they are thinking about doing could have a negative tax implication, and as their REALTOR®, they may want to make sure the client has spoken with their accountant to verify the timing is correct. The REALTOR® does not have to tell them what they should do, only recognize the potential issue and inform the client of the potential issue so they can validate it with the appropriate professional.
Information—not advice
This type of representation, when done correctly, is not the providing of legal, tax or financial advice, but is informing the client of the potential issues that could arise from their real estate decision. It is the author’s opinion that this action will not increase liability, but should help REALTORS® avoid liability by providing a higher level of service and professionalism. So, REALTORS® should seek out education that provides a better understanding of the legal, tax and financial implications that may be encountered during a real estate transaction. They must then become comfortable with sharing the information in a way that is not providing advice, but is giving clients information and direction toward the appropriate professional who is needed.
Learn tax laws and changes that affect REALTORS®, the tax implications of owning a primary residence, and how taxes affect residential investment properties in “Tax Strategies for the Real Estate Professional” on CRS.com/catalogsearch.
