Sarah, a licensed salesperson, discovers that a property she is marketing has a significant building defect that the vendor has not disclosed. What should she do?
Correct Answer
B) Advise the vendor they must disclose this information
The licensee has a duty to ensure material information is disclosed and should advise the vendor of their obligation to disclose the defect. The agent cannot knowingly withhold material information that could affect a purchaser's decision.
Why This Is the Correct Answer
Under the Real Estate Agents Act 2008, licensees have a duty to act with integrity and ensure material information is disclosed. Section 125 requires agents to exercise care, diligence and skill, while the Code of Professional Conduct and Client Care mandates honest dealing. When discovering a material defect, the salesperson must advise the vendor of their legal obligation to disclose this information to potential purchasers, as failing to do so could constitute misleading or deceptive conduct.
Why the Other Options Are Wrong
Option A: Continue marketing as the vendor has not disclosed it
Continuing to market without addressing the disclosure issue would breach the licensee's duty under the Real Estate Agents Act 2008. The agent cannot knowingly participate in withholding material information that could affect a purchaser's decision, as this violates their professional obligations and could constitute misleading conduct.
Option C: Only mention it if directly asked by potential purchasers
Only disclosing when directly asked is insufficient and potentially misleading. Material defects must be proactively disclosed, not hidden until specifically questioned. This passive approach fails to meet the standard of care required under the Real Estate Agents Act 2008 and could expose both the vendor and agent to liability.
Option D: Withdraw from the listing immediately
Immediately withdrawing from the listing is an extreme response that doesn't serve anyone's interests. The appropriate action is to work with the vendor to ensure proper disclosure. Withdrawal should only be considered if the vendor refuses to comply with disclosure obligations after being properly advised.
Deep Analysis of This Agency Practice Question
This question tests understanding of disclosure obligations under the Real Estate Agents Act 2008, specifically the duty of care and fiduciary responsibilities licensees owe to all parties. When a salesperson discovers material information that could affect a purchaser's decision, they cannot simply ignore it or wait for the vendor to act. The Act requires licensees to act with integrity and in the best interests of all parties, which includes ensuring material defects are properly disclosed. This principle protects consumers and maintains market confidence. The salesperson's role is advisory - they must inform the vendor of their disclosure obligations rather than making unilateral decisions about withholding information or withdrawing from listings. This approach balances the agent's duty to their client (vendor) with their broader professional obligations under the Act.
Background Knowledge for Agency Practice
The Real Estate Agents Act 2008 establishes comprehensive duties for licensees, including acting with care, diligence and skill, and dealing honestly with all parties. Material information includes any fact that could reasonably be expected to influence a purchaser's decision. The Act's Code of Professional Conduct requires agents to ensure clients understand their legal obligations, including disclosure requirements. Licensees must balance their fiduciary duty to clients with broader professional obligations to the market and consumers. Failure to ensure proper disclosure can result in disciplinary action, civil liability, and damage to professional reputation.
Memory Technique
When discovering defects: Always Disclose Via Informing, Supporting, Educating. Think of yourself as an ADVISOR - you don't make the disclosure yourself, but you ADVISE the vendor they must disclose. Like a lawyer advising a client of their legal obligations, you guide them to compliance rather than acting unilaterally.
When you see questions about discovered defects or material information, remember ADVISE - your role is to advise the vendor of their disclosure obligations, not to hide information, make selective disclosures, or abandon the relationship immediately.
Exam Tip for Agency Practice
Look for the option that involves educating or advising the vendor about their obligations. Agents don't make disclosure decisions unilaterally - they guide clients toward compliance with legal requirements.
Real World Application in Agency Practice
A salesperson marketing a 1960s home discovers during a routine visit that there's evidence of asbestos in the garage ceiling that wasn't mentioned in the vendor's disclosure. Rather than continuing to show the property or immediately withdrawing, the salesperson contacts the vendor to explain their legal obligation to disclose this material defect and recommends they obtain professional testing and update their disclosure statement before continuing with marketing.
Common Mistakes to Avoid on Agency Practice Questions
- •Thinking the agent can choose whether to disclose based on vendor preferences
- •Believing withdrawal is the only option when discovering undisclosed defects
- •Assuming passive disclosure (only when asked) meets legal requirements
Related Topics & Key Terms
Key Terms:
More Agency Practice Questions
Under the Real Estate Agents Act 2008, what is the primary fiduciary duty that a real estate agent owes to their client?
What type of agency agreement allows a real estate agent to receive commission even if the property is sold by another agent?
Which licence category is required for a person to sign agency agreements on behalf of a real estate agency?
When must a real estate licensee disclose any personal interest in a property transaction?
Under a sole agency agreement, in which circumstance would the agent NOT be entitled to commission?
- → A real estate agent receives two offers on a property at the same time. What is their primary obligation?
- → Which of the following situations would create a conflict of interest requiring disclosure by a real estate licensee?
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- → An agent has an exclusive agency agreement that expires in two days, but the vendor wants to extend it for another month with a different agent. The original agent claims they introduced a purchaser who is still negotiating. What determines the original agent's entitlement to commission?
- → Under the Real Estate Agents Act 2008, what is the primary duty that a real estate agent owes to their client?
- → Which licence category allows a person to carry out real estate agency work on behalf of a licensed agent?
- → What must be included in every agency agreement under the Real Estate Agents Act 2008?
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