Texas Real Estate Sales Agent ExamAgencyMedium
A real estate sales agent, acting as a listing agent for a seller, discovers a significant unpermitted addition to the property during a routine check. The seller explicitly instructs the agent not to disclose this information to potential buyers. What is the agent's most appropriate course of action?
- AWithdraw from the listing agreement if the seller insists on concealing the material fact.
- BFollow the seller's instruction to maintain confidentiality, as it is a fiduciary duty.
- CDisclose the unpermitted addition to all potential buyers, regardless of the seller's instruction.
- DSuggest to the seller that they obtain a retroactive permit to legalize the addition.
Show answer & explanationAnswer & explanation
Correct answer: A. Withdraw from the listing agreement if the seller insists on concealing the material fact.
An agent cannot knowingly participate in misrepresentation or concealment of material facts. If a seller insists on withholding information that the agent is legally obligated to disclose, the agent must withdraw from the relationship. While suggesting a permit is a good advice, the immediate ethical and legal dilemma regarding disclosure must be addressed first.
Why the other options are wrong
- B. The duty of confidentiality does not extend to concealing material facts that are required by law to be disclosed.
- C. Directly disclosing against a client's instruction can violate other duties, but the agent cannot participate in fraud. Withdrawal is the best option if the seller insists.
- D. This is a good suggestion but does not resolve the immediate legal and ethical conflict regarding the seller's instruction to conceal.
Disclosure of Material Facts
Agents have a legal and ethical obligation to disclose all known material facts about a property to all parties in a transaction, even if it is detrimental to their client's position.
- Material facts are those that could influence a reasonable person's decision.
- Overrides the duty of confidentiality if the fact is legally required to be disclosed.
- Failure to disclose can lead to legal liability for the agent and broker.
Memory trick: Law trumps loyalty when secrets turn rotten.