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

The correct answer is Inform the seller they must disclose this material defect. Option B correctly reflects the agent's duty under Canadian real estate law. TRESA and provincial regulations require agents to advise clients about disclosure obligations for material defects. The agent maintains their fiduciary duty by informing the seller of their legal requirement to disclose, rather than taking independent action. This approach protects both the seller from potential legal liability and ensures compliance with disclosure requirements while preserving the agency relationship.

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

Material defects are physical conditions that significantly affect property value, safety, or desirability. Under TRESA, RESA, and provincial regulations, sellers have legal obligations to disclose known material defects. Real estate agents have dual responsibilities: fiduciary duties to their clients and professional obligations to ensure legal compliance. Agents cannot assist clients in illegal activities, including concealing material facts. The disclosure principle protects buyers' rights to make informed decisions while establishing clear legal frameworks for property transactions across Canadian provinces.

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

ADVISE: Always Disclose Via Informing Seller's Expectations. When you discover a material defect, you must ADVISE the seller of their disclosure obligations rather than taking independent action or ignoring the issue. When facing disclosure dilemma questions, remember ADVISE. The agent's role is to inform and educate the client about their legal obligations, not to bypass the client or ignore material facts. This maintains the agency relationship while ensuring legal compliance.

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

Look for the option that maintains the agency relationship while ensuring legal compliance. Agents educate clients about disclosure obligations rather than taking independent action or ignoring material defects.

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

An agent listing a 1970s bungalow notices water stains and musty odors in the basement during the initial walkthrough. The seller mentions they've had 'some moisture issues' but haven't disclosed this on property forms. The agent must explain to the seller that basement leaks constitute a material defect requiring disclosure, helping them understand legal obligations while protecting both parties from future liability. This conversation strengthens the client relationship through professional guidance.

Question

Agency & Professional EthicsDisclosure ObligationsEASY

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

Answer Options

A

Ignore the issue since they represent the seller

B

Inform the seller they must disclose this material defect

C

Tell potential buyers about the leak without informing the seller

D

Wait to see if buyers discover the issue during inspection