A salesperson working under a branch manager is listing a property owned by her brother. What disclosure must she make to prospective buyers?
Correct Answer
C) Written disclosure to every prospective buyer before any agreement is signed
A brother is a person related to the licensee under section 137 of the Real Estate Agents Act 2008, and he stands to benefit financially from the sale. Section 136 requires the licensee to disclose that in writing to every prospective party, before or when they are given contractual documents, so buyers must be told in writing before any agreement is signed.
Why This Is the Correct Answer
A brother is a person related to the licensee (s 137(2)(f)), and he will benefit financially from the sale. Section 136 requires the licensee to disclose that in writing to every prospective party, no later than when they are given contractual documents, so buyers must be told in writing before any agreement is signed.
Why the Other Options Are Wrong
Option A: None, because her brother is the client and buyers are not entitled to know
Section 136 requires disclosure to every prospective party when a person related to the licensee, such as a sibling, may benefit financially.
Option B: Disclosure to her branch manager only, since buyers are dealing with the agency
Internal disclosure does not satisfy section 136, which requires disclosure to each prospective party to the transaction.
Option D: Telling buyers verbally is enough, as long as it happens before an offer is made
Section 136 requires the disclosure to be in writing; a verbal mention does not comply.
Deep Analysis of This Agency Practice Question
Section 136 is a transparency rule aimed at customers: whenever the licensee or a related person may benefit financially from a transaction, every prospective party must be told in writing. A vendor who is the licensee's sibling obviously benefits from the sale price, so buyers are entitled to know the salesperson has a family stake in getting the best price for the vendor. Internal disclosure or a passing verbal remark does not meet the section.
Background Knowledge for Agency Practice
Section 137 lists persons related to a licensee, including a spouse or partner, children, siblings, parents, grandparents, uncles, aunts, nephews and nieces, employees and partners. Section 136 requires written disclosure to every prospective party of whether the licensee or a related person may benefit financially, made before or at the time contractual documents are provided. Commission alone does not count as a benefit (s 136(4)).
Memory Technique
If a relative listed in section 137 benefits financially, every prospective party gets written disclosure no later than the contract documents.
Use it whenever a licensee sells for, or buys from, a family member.
Exam Tip for Agency Practice
Section 136 disclosure is in writing, goes to every prospective party, and must be made no later than when contractual documents are provided.
Real World Application in Agency Practice
A salesperson lists her brother's townhouse. Her agency's disclosure form, stating that the vendor is her brother, is attached to the listing documents and given to every buyer who asks for the sale and purchase agreement.
Common Mistakes to Avoid on Agency Practice Questions
- •Thinking the relationship matters only to the vendor client
- •Treating a verbal mention as enough
- •Believing disclosure to the branch manager satisfies section 136
Related Topics & Key Terms
Key Terms:
More Agency Practice Questions
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Which of the following situations would create a conflict of interest requiring disclosure by a real estate licensee?
Sarah is a licensed salesperson working for ABC Real Estate. When showing a property to buyers, who does she primarily represent?
Under the Real Estate Agents Act 2008, what is the primary duty that a real estate agent owes to their client?
Which licence allows a person to carry out real estate agency work for an agent, but only under supervision?
- → Under section 126 of the Real Estate Agents Act 2008, what must happen after the client signs an agency agreement for the agent to be entitled to commission?
- → A licensed agent discovers that their salesperson has been providing advice about tax implications of a property investment without appropriate qualifications. What is the agent's responsibility?
- → An agency agreement contains a clause stating that the agent's commission is payable even if the property is sold by the vendor directly to a buyer introduced by the agent during the agency period, but the sale settles after the agency expires. Is this clause enforceable?
- → What must a real estate agent disclose to a potential purchaser when showing a property?
- → Under a sole agency agreement, when is the vendor still liable to pay commission to the agent?
- → Sarah holds a salesperson's licence and works for ABC Real Estate. When presenting an offer to a vendor, who is legally responsible for ensuring all disclosure obligations are met?
- → A real estate agent discovers that a property has a leaky roof after the agency agreement is signed but before any offers are received. What is the agent's obligation?
- → Which of the following allows an agent to end an agency agreement before its expiry date?
- → Under the Real Estate Agents Act 2008, what is the primary fiduciary duty that a real estate agent owes to their client?
- → What must a licensee do when they become aware of a material defect in a property they are marketing?
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