National Real Estate Exam (PSI)Property DisclosuresHard
A buyer's agent discovers, through public records, that a nearby vacant lot was formerly the site of a dry-cleaning business that used chlorinated solvents, and groundwater contamination was documented in a state environmental database. What is the agent's best course of action?
- ADisclose the finding only if the seller specifically authorizes it
- BIgnore the finding since it involves a neighboring property, not the subject property
- CDisclose the finding to the buyer client, since it may be a material fact affecting the buyer's decision to purchase
- DReport the finding directly to the EPA instead of informing the buyer
Show answer & explanationAnswer & explanation
Correct answer: C. Disclose the finding to the buyer client, since it may be a material fact affecting the buyer's decision to purchase
Even facts about a neighboring property can be material if they could reasonably affect a buyer's decision (e.g., risk of nearby groundwater contamination migrating or affecting property value); an agent representing the buyer has a duty to share such known information with their client.
Why the other options are wrong
- A. The buyer's agent's duty runs to the buyer, not contingent on seller permission.
- B. Off-site environmental hazards can still be material to a buyer's decision.
- D. While environmental agencies may already have this on record, the agent's duty is to inform their own client first.
Off-Site Material Facts
Facts about conditions near, but not on, a property (e.g., nearby contamination) can still be material if they reasonably affect value, desirability, or safety.
- Materiality isn't limited to on-site conditions
- Buyer's agents owe a duty to disclose known material facts to their client
- Public environmental databases can reveal nearby contamination
Memory trick: Contamination next door still matters — tell the buyer, don't let it slide.