A buyer's agent discovers that the seller of a property has a serious financial hardship and is desperate to sell quickly. The agent knows this information could give her buyer a significant negotiating advantage. What is the agent's ethical and legal obligation regarding this information?
- ADisclose it to the buyer, as it's a material fact relevant to the buyer's interests.
- BInform the seller's agent that she is aware of the hardship.
- CUse the information to negotiate the lowest possible price for the buyer without disclosing the source.
- DKeep it confidential, as it is personal information about the seller.
Show answer & explanationAnswer & explanation
Correct answer: A. Disclose it to the buyer, as it's a material fact relevant to the buyer's interests.
A buyer's agent has a fiduciary duty of loyalty and disclosure to their client. Information about the seller's financial hardship that could impact the negotiation is a material fact from the buyer's perspective and must be disclosed to the buyer, even if it's sensitive information about the seller. This is a core aspect of the agent's duty to act in the best interest of their client.
Why the other options are wrong
- B. Informing the seller's agent doesn't fulfill the duty to the buyer and could be a breach of confidentiality if the seller's agent wasn't the source.
- C. Using the information without disclosing it to the buyer is still a breach of the agent's duty of full disclosure to their client.
- D. While sensitive, the agent's primary duty is to her client, the buyer. This information is material to the buyer's interests.
Duty of Loyalty & Disclosure (Buyer's Agent)
A buyer's agent must prioritize the buyer's best interests, including disclosing all material information that could influence the buyer's decision, even if it involves sensitive information about the seller.
- Always act in the client's best interest.
- Disclose all known material facts.
- Duty outweighs confidentiality to a non-client.
Memory trick: LOYALTY and DISCLOSURE are client's best friends.