A real estate sales agent, while acting as a buyer's agent, discovers that the property their client is interested in is located in a known flood plain, a fact not disclosed by the seller or the seller's agent. The agent promptly informs the buyer. Additionally, the agent is aware that the property's listing price is significantly below market value due to the seller needing a quick sale, a fact the seller's agent explicitly told them to keep confidential. What are the agent's disclosure obligations in this scenario?
- AKeep both the flood plain information and the seller's motivation confidential from the buyer to protect the transaction.
- BDisclose the flood plain information to the buyer, and advise the buyer to offer above the listing price because of the seller's motivation.
- CDisclose the flood plain information to the buyer, but keep the seller's motivation (below market value) confidential from the buyer.
- DDisclose both the flood plain information and the seller's motivation for a quick sale to the buyer.
Show answer & explanationAnswer & explanation
Correct answer: D. Disclose both the flood plain information and the seller's motivation for a quick sale to the buyer.
As a buyer's agent, the agent has a fiduciary duty of loyalty and full disclosure to their client. This means disclosing all known material facts that could influence the buyer's decision, including both adverse conditions (flood plain) and advantageous information (seller's motivation for a quick sale, indicating potential for a lower offer). The seller's agent cannot compel the buyer's agent to withhold information beneficial to the buyer.
Why the other options are wrong
- A. Keeping either confidential from the buyer would violate the buyer's agent's fiduciary duties.
- B. While advising the buyer is appropriate, withholding the full extent of the seller's motivation or failing to disclose the flood plain fully would be a breach.
- C. Keeping the seller's motivation confidential from the buyer would violate the buyer's agent's duty of loyalty and full disclosure to their client.
Agent's Duty of Full Disclosure to Client
A fiduciary duty requiring an agent to disclose all known material facts and relevant information to their client, whether beneficial or detrimental, that could influence the client's decision in a transaction.
- Applies to all information relevant to the client's interests.
- Includes both adverse and advantageous facts.
- Cannot be overridden by requests from the opposing party's agent.
Memory trick: Your client gets the 'whole truth and nothing but the truth' from you.