A potential purchaser asks a licensee about the vendor's motivation for selling. The vendor has told the licensee confidentially that they are facing financial difficulties. How should the licensee respond?
Correct Answer
A) Say the vendor is motivated to sell, if authorised, without giving reasons
The licensee must not mislead the purchaser (rule 6.4), but the vendor's financial difficulties are confidential (rules 9.16 and 9.17). The licensee can give an honest, general answer the vendor has approved, such as that the vendor is motivated to sell, without revealing the reason.
Why This Is the Correct Answer
Rules 9.16 and 9.17 protect the vendor's confidential information, and rule 6.4 forbids misleading the buyer. The licensee can give an honest, general answer the vendor has approved, such as saying the vendor is motivated, without revealing why.
Why the Other Options Are Wrong
Option B: Disclose the financial difficulties, since they may affect the buyer's offer
The difficulties are confidential personal information, and rule 9.17 bars disclosing them without written consent.
Option C: Refer the purchaser to the vendor directly for an answer to that question
Sending the buyer to the vendor sidesteps the licensee's role and may expose the vendor to pressure.
Option D: Suggest the purchaser offer less because of the vendor's circumstances
Using the vendor's confidential position against them breaches rule 9.16 and the duty to act in the client's best interests.
Deep Analysis of This Professional Conduct Question
Two duties meet here. To the vendor the licensee owes confidentiality and loyalty (rules 6.1, 9.1, 9.16 and 9.17). To the buyer the licensee owes honesty: rule 6.4 forbids misleading or withholding information that should in fairness be provided. The reason for selling is not information the buyer is entitled to, so the licensee may decline to give it, or give a truthful general answer the vendor has agreed to. What the licensee cannot do is lie or reveal the confidential detail.
Background Knowledge for Professional Conduct
Client Care Rules 2012: rule 6.2 (good faith and fair dealing with all parties), rule 6.4 (must not mislead or give false information), rule 9.1 (act in the client's best interests), rule 9.16 (must not use confidential information for others' benefit), rule 9.17 (must not disclose confidential personal information without written consent or another listed ground).
Memory Technique
Think of confidentiality as building a BRIDGE: Balance honesty with privacy, Respect client trust, Inform appropriately, Disclose generally not specifically, Give motivation without details, Ethical communication protects everyone. The bridge connects both parties while maintaining appropriate barriers.
When facing confidentiality vs honesty questions, visualize building a bridge that connects both parties with appropriate information while maintaining protective barriers around sensitive details. Ask: 'What can I share that serves both parties without breaking client trust?'
Exam Tip for Professional Conduct
Honesty does not require disclosure of a client's secrets. Look for the answer that stays truthful, reveals nothing confidential, and stays within what the vendor has authorised.
Real World Application in Professional Conduct
A vendor going through a separation has agreed that the agent may tell buyers the vendor 'wants a sale this spring'. When a buyer asks why they are selling, the agent says exactly that and nothing more.
Common Mistakes to Avoid on Professional Conduct Questions
- •Revealing personal circumstances in the name of honesty
- •Inventing a false reason for the sale
- •Encouraging buyers to exploit the vendor's position
Related Topics & Key Terms
Key Terms:
More Professional Conduct Questions
According to the REA Code of Professional Conduct and Client Care, what is the primary duty of a real estate licensee?
A licensee receives confidential information about their client's financial difficulties. When can this information be disclosed to third parties?
During a complaint investigation, what is a licensee's obligation regarding cooperation with the Real Estate Authority?
A licensee discovers that a competing agent has made false statements about a property they have listed. What is the most appropriate course of action?
A licensee is charged with misconduct for serious breaches of the Code. During the disciplinary hearing, they argue that their actions were directed by their branch manager. How will this affect the Tribunal's decision?
- → A licensee keeps working while a complaint against them goes to the Real Estate Agents Disciplinary Tribunal. If misconduct is proved, what can the Tribunal do?
- → A licensee working for Agency A learns confidential information about a client’s financial difficulties. They then move to Agency B and are asked to give market advice on that client’s property to a prospective buyer who is a client of Agency B. How should they handle this situation?
- → A licensee working for Agency A learns confidential information about a client's urgent need to sell due to financial difficulties. The licensee then moves to Agency B and uses this information to approach the former client with a lower offer through a contact. This scenario primarily involves a breach of which professional obligation?
- → An agent receives two written offers on the same property at the same time: one from the agent's personal friend at $50,000 below the asking price, and one from an unknown buyer at the asking price. The agent presents only the friend's offer. Under the Real Estate Agents Act 2008, this most likely amounts to:
- → According to the REA Code of Professional Conduct and Client Care, what is the primary purpose of the Code?
- → In what situation would the Real Estate Agents Disciplinary Tribunal have jurisdiction to hear a complaint against a former licensee?
- → James, a branch manager, becomes aware that one of his salespeople has been providing misleading information to clients about settlement timeframes. Under the REA Code, what is James's primary obligation?
- → Under section 121 of the Real Estate Agents Act 2008, what must appear on every advertisement an agent publishes?
- → When can a licensee disclose confidential client information to a third party?
- → A client asks their real estate agent to not disclose a known flooding issue to potential buyers. What should the agent do?
People Also Study
Property Law & Legislation
56 questions
Agency Practice
89 questions
Sale & Purchase Process
63 questions
Property Management
85 questions
Related Study Resources
Previous Question
A licensee working for Agency A learns confidential information about a client’s financial difficulties. They then move to Agency B and are asked to give market advice on that client’s property to a prospective buyer who is a client of Agency B. How should they handle this situation?
Next Question
A real estate agent discovers that a property they are marketing has a building consent issue that the vendor is unaware of. What is the agent's obligation under the REA Code?