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Avoiding Ethics Problems When Disclosing Information

Sep 5, 2016


Article 1 - When representing a buyer, seller, landlord, tenant, or other client as an agent, Realtors® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve Realtors® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant, or other party in a non-agency capacity, Realtors® remain obligated to treal all parties honestly.

Case # 1-25: Disclosure of Latent Defects
Realtor® Anders had listed seller Smith's vintage home. Buyer Brown made a purchase offer that was contingent on a home inspection. The home inspection disclosed that the gas furnace was in need of replacement because unacceptable levels of carbon monoxide were being emitted.

Based on the home inspector's report, Buyer Brown chose not to proceed with the purchase.

Realtor® Anders told Seller Smith that the condition of the furnace and the risk that it posed to the home's inhabitants would need to be disclosed to other potential purchasers. Seller Smith disagreed and instructed Realtor® Anders not to say anything about the furnace to other potential purchasers. Realtor® Anders replied that was an instruction he could not follow so Realtor® Anders and Seller Smith terminated the listing agreement.

Three months later, Realtor® Anders noticed that Seller Smith's home was back on the market, this time listed with Realtor® Crosby. His curiosity piqued, Realtor® Anders phoned Realtor® Crosby and asked whether there was a new furnace in the home. "Why no" said Realtor® Crosby. "Why do you ask?" Realtor® Anders told Realtor® Crosby about the home inspector's earlier findings and suggested that Realtor® Crosby check with the seller to see if repairs had been made.

When Realtor® Crosby raised the question with Seller Smith, he was irate. "That's none of his business," said Seller Smith who became even angrier when Realtor® Crosby advised him that potential purchasers would have to be told about the condition of the furnace since it posed a serious potential health risk.

Seller Smith filed an ethics complaint against Realtor® Anders alleging that the physical condition of his property was confidential; that Realtor® Anders had an ongoing duty to respect confidential information gained in the course of their relationship; and that Realtor® Anders had breached Seller Smith's confidence by sharing information about the furnace with Realtor® Crosby

Was REALTOR® Andrews in violation of Article 1?

The Hearing Panel disagreed with Seller Smith's contentions. They noted that Realtors® do in fact have an obligation to preserve confidential information gained in the course of any relationship with the client, Standard of Practice 1-9 specifically provides that latent material defects are not considered "confidential information" under the Code of Ethics. Consequently, Realtor® Anders' disclosure did not violate Article 1 of the Code of Ethics.
  • Disclosure
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