Article 2 reads: Realtors® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. Realtors® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency duties owed to their clients.
Obligation To Ascertain Pertinent Facts
Shortly after the Listing Realtor® closed the sale of a home to a buyer, a complaint was received by the Board. The complaint charged the listing broker with an alleged violation of Article 2 because he failed to disclose a substantial fact concerning the property. The charge indicated that the house was not connected to the city sanitary sewage system, but rather had a septic tank.
In a statement to the Board's Grievance Committee, the buyer stated that the subject was not discussed during his various conversations with the listing broker about the house.
However, the buyer pointed out that his own independent inquires had revealed that the street on which the house was located, was "sewered" and he naturally assumed the house was connected. He had since determined that every other house on the street for several blocks in both directions was connected. He stated that the listing broker failed to disclose this exceptional situation, thus failed to disclose a pertinent fact.
The Listing Realtor®'s defense in the hearing before a hearing panel of the Professional Standards Committee was:
- That he did not know this particular house was not connected with the sewer;
- That in advertising the house, he had not represented it as being connected;
- That it was common knowledge that most, if not all, of the houses in the area were connected to the sewer;
- That the seller, in response to the listing broker's questions at the time the listing was entered into, had stated that the house was connected to the sewer.
What was the decision of the hearing panel?
The panel determined that the absence of a sewer connection in an area where other houses were connected was a substantial and pertinent fact in the transaction, but the fact that the house was not connected to the sewer was not possible to determine in the course of a visual inspection and, further, that the Listing Realtor® had made appropriate inquiries of the seller, and was entitled to rely on the representations of the seller. The panel concluded that the listing broker was not in violation of Article 2.