All real estate brokers and their agents owe their clients the duty of Full Disclosure, one of the 6 fiduciary responsibilities. However, what exactly does full disclosure mean?
Full Disclosure – A broker/agent is obligated to disclose to his client all relevant and material information that the broker/agent knows and that pertains to the scope of the agency.
This duty specifically obligates a real estate broker representing a buyer to reveal to the buyer:
If the seller is willing to accept a lower offer.
Any information relating to the urgency of the seller’s need to sell the property.
If the broker has any relationship to, or any interest in, the seller or the property for sale.
Any information regarding the value of the property.
The length of time the property has been on the market and any information regarding offers or counteroffers made on the property.
Any additional information that might affect a buyer’s ability to obtain the property at the lowest price and most favorable terms to the buyer.
This duty specifically obligates a real estate broker representing a seller to reveal to the seller:
If the buyer is willing to pay more for the property than is currently being offered.
Any information relating to the urgency of the buyer to obtain a property.
If the broker has any relationship to, or any interest in, the buyer.
Any information regarding the buyer’s financial ability to purchase the home.
Any additional information that might affect the seller’s ability to sell the property at the highest price and most favorable terms to the seller.
So what does all this mean? If you are a seller, you likely have a contract stating that you have employed your listing agent and his company to represent you. This agent must therefore bring to you any and all information pertaining to you selling your home for the highest value and with the most favorable terms to you.
Example: Let’s say another real estate agent has a buyer and is presenting an offer. In the course of talking between your agent and the buyer’s agent, the buyer’s agent lets it slip that the buyer is willing to pay more for your home. Rather than encourage you to accept the existing offer, your agent must inform you of the buyer’s motivation. If the buyer’s agent revealed this information without the buyer’s consent, this was a violation of the buyer agent’s duty of confidentiality to the buyer. But nonetheless, now that his information is known to your agent, he is obligated to tell you. Knowing this information directly affects your ability to get the highest value for your home.
In the example above, the buyer’s agent violated one of the fiduciary responsibilities owed to the buyer. If the buyer had not given express permission for the agent to reveal that the buyer was willing to pay more, then the buyer’s agent had no authority to reveal it, and in doing so, compromised the buyer’s ability to obtain the property at the lowest price and most favorable terms.
Full Disclosure is a very important aspect of any real estate transaction. You must be able to trust the agent whom you have hired. If your listing agent brings the buyer, you have an entirely different set of rules. This is known as Dual Agency and is a very serious situation. Under Dual Agency, your listing agent now represents both sides of the transaction and no longer owes you (or the buyer) full disclosure. Doing so would violate the other duty of confidentiality. You do not have to agree to dual agency and should seek to understand exactly how that works in your state before agreeing to a dual agency situation.