A real estate agent discovers that a property they are listing has a history of flooding that the seller has not disclosed. What should the agent do?

Q: What is the correct answer to: A real estate agent discovers that a property they are listing has a history of flooding that the seller has not disclosed. What should the agent do?

The correct answer is Advise the seller to disclose the information and refuse to continue if they won't. Option C correctly balances the agent's fiduciary duty to the seller with professional and legal obligations. Under TRESA and provincial regulations, agents cannot assist in misrepresentation or fraud. The agent must advise the seller of their disclosure obligations regarding material defects like flooding history. If the seller refuses to disclose, the agent must withdraw to avoid participating in fraudulent concealment. This approach protects both the agent's license and maintains market integrity.

Q: What background knowledge is needed for this Agency & Professional Ethics question?

Canadian real estate agents operate under strict disclosure requirements for material defects. Material facts are those that would influence a reasonable buyer's decision or affect property value. Flooding history qualifies as a material latent defect. Under TRESA (Ontario), RESA (Alberta), and similar provincial legislation, agents have dual obligations: fiduciary duties to clients and professional duties to the public. Agents cannot assist in fraud or misrepresentation, even to benefit their clients. When conflicts arise between client interests and legal/ethical obligations, agents must prioritize legal compliance and may need to withdraw from representation.

Q: What is a good way to remember the answer to this Agency & Professional Ethics question?

ADVISE: Always Disclose Via Informing Seller Ethically. When discovering material defects, always advise the seller first about their disclosure obligations. If they refuse, withdraw ethically rather than participate in concealment. When facing disclosure dilemmas on the exam, remember ADVISE. The correct answer will typically involve advising the client about their obligations first, then withdrawing if they refuse to comply, rather than either concealing information or disclosing without client consultation.

Q: What exam tip applies to this Agency & Professional Ethics question?

Look for answers that balance client loyalty with legal compliance. The correct choice usually involves educating the client about their obligations first, then withdrawing if they refuse to comply with disclosure requirements.

Q: How does this Agency & Professional Ethics concept apply in real world practice?

An agent listing a basement apartment discovers water stains and learns from neighbors about previous flooding. The seller claims it was a one-time incident and asks the agent not to mention it. The agent must explain disclosure obligations, document the conversation, and insist on proper disclosure in listing materials. If the seller refuses, the agent should terminate the listing agreement to avoid potential liability for fraudulent misrepresentation and protect their professional license.

Question

Agency & Professional EthicsMaterial Facts DisclosureMEDIUM

A real estate agent discovers that a property they are listing has a history of flooding that the seller has not disclosed. What should the agent do?

Answer Options

A

Keep the information confidential to protect the seller's interests

B

Disclose the flooding history to potential buyers immediately

C

Advise the seller to disclose the information and refuse to continue if they won't

D

Only disclose if directly asked about flooding by a buyer