A buyer's agent is assisting a client in purchasing a home. The agent discovers that the seller's agent, who is from a different brokerage, has failed to disclose a known significant foundation issue with the property. The buyer's agent has already informed their client. What is the buyer's agent's ethical and legal obligation to the seller's agent or the seller directly in this situation?
- AThe buyer's agent should advise their client to use this information as leverage in negotiations without disclosing it further.
- BThe buyer's agent should notify TREC about the seller's agent's non-disclosure.
- CThe buyer's agent must directly inform the seller's agent (or the seller if unrepresented) of the known, undisclosed material fact.
- DThe buyer's agent has no obligation to the seller's agent or seller, as their duty is solely to their buyer.
Show answer & explanationAnswer & explanation
Correct answer: C. The buyer's agent must directly inform the seller's agent (or the seller if unrepresented) of the known, undisclosed material fact.
In Texas, all licensees involved in a transaction have an independent duty to disclose known material facts about a property to all parties, even if those parties are not their clients. This duty supersedes the duty of loyalty to one's own client when it comes to material defects. Therefore, the buyer's agent must ensure the seller's agent (or seller) is aware that the defect is known.
Why the other options are wrong
- A. Using undisclosed material facts as leverage without ensuring all parties are aware would be unethical and violate disclosure obligations.
- B. Reporting to TREC might be a later step if the issue isn't resolved, but the immediate obligation is to ensure the material fact is disclosed.
- D. This is incorrect; while loyalty is to the client, the duty to disclose material facts to all parties is a fundamental ethical and legal obligation.
Duty to Disclose to All Parties
A fundamental obligation of all real estate licensees to disclose known material facts about a property to all parties in a transaction, regardless of whom the licensee represents.
- Applies to all known material facts, especially defects.
- Promotes honesty and fair dealing in real estate transactions.
- Supersedes confidentiality to one's own client regarding material facts.
Memory trick: Material facts are like a public service announcement for the property.