California Real Estate Broker ExaminationReal Estate PracticeHard
A real estate broker is working with a seller to list their property. The seller mentions that they previously installed a new furnace, but it occasionally makes a loud rattling noise. The broker advises the seller not to disclose this minor issue, as it might deter potential buyers. This advice is a violation of the broker's duty to:
- ALoyalty to the seller.
- BConfidentiality.
- CObedience.
- DGood faith and fair dealing.
Show answer & explanationAnswer & explanation
Correct answer: D. Good faith and fair dealing.
While a broker has a duty of loyalty to their client, that duty does not extend to advising or participating in fraudulent or dishonest acts. Advising a seller to conceal a known defect, even a 'minor' one, violates the broker's overarching duty of good faith and fair dealing to all parties and the public, and can lead to misrepresentation.
Why the other options are wrong
- A. While the broker is loyal to the seller, this loyalty does not supersede the ethical and legal obligation to act with good faith and fair dealing in a transaction, which includes not advising the concealment of material facts.
- B. Confidentiality relates to private client information, not material property facts that should be disclosed.
- C. Obedience means following lawful instructions; this advice is unlawful/unethical.
Duty of Good Faith and Fair Dealing
Real estate licensees owe a duty of good faith and fair dealing to all parties in a transaction, requiring honesty and ethical conduct, even when representing a client.
- Brokers cannot advise clients to conceal material facts.
- This duty applies to all parties, not just the client.
- It supersedes the duty of loyalty if loyalty would lead to unlawful or unethical acts.
Memory trick: Ethics are choices, good faith is the base, honesty always wins the race.