A buyer's agent in California, working for a different brokerage than the seller's agent, discovers during due diligence that the subject property is located in a FEMA-designated flood zone. This information does not appear anywhere in the seller's disclosures. What is the buyer's agent's primary obligation under California law?
Correct Answer
A) Disclose the flood zone status to the buyer and explain its potential significance, including insurance requirements and financial impact
Under California Civil Code §2079 and the fiduciary duty owed to a buyer, a buyer's agent must promptly disclose all material facts that could affect the buyer's decision to purchase or the price the buyer is willing to pay. Flood zone designation is a material fact because it triggers mandatory flood insurance requirements under federal law, increases carrying costs, and can affect resale value. The duty is not merely to pass along the fact but to explain its significance so the buyer can make an informed decision — this is the 'advise and counsel' component of fiduciary duty recognized under California agency law.
Why This Is the Correct Answer
Why the Other Options Are Wrong
Deep Analysis of This Laws Of Agency Fiduciary Duties Question
Background Knowledge for Laws Of Agency Fiduciary Duties
Real World Application in Laws Of Agency Fiduciary Duties
Common Mistakes to Avoid on Laws Of Agency Fiduciary Duties Questions
Related Topics & Key Terms
Key Terms:
Related Concepts
An agency relationship created by a clear, explicit agreement between the principal and agent, either orally or in writing.
The highest legal obligation of trust and confidence owed by an agent to their principal, requiring the agent to act solely in the principal's best interest.
An agency relationship where the agent agrees to act on behalf of the principal without receiving compensation.
More Laws Of Agency Fiduciary Duties Questions
A property sold for $450,000. The commission rate was 6%. If the listing broker received 60% of the total commission, how much did the listing broker receive?
An individual who is not employed by the client, but has been delegated agency duties by an agent of the client, is referred to as a(n):
What are the three steps of the agency disclosure in proper chronological order?
An agent needs to disclose a conflict of interest to the affected parties when a principal or service provider in the transaction is the agent’s:
A broker who simultaneously represents the best interests of both opposing parties in a transaction is known as a(n):
- → When showing a listed residential property of one to four dwelling units to potential buyers, the listing broker is required to disclose:
- → Broker fees deposited with the broker before they are earned are called:
- → A real estate broker is subject to disciplinary action from the Department of Real Estate (DRE) if they:
- → The seller states they will accept the buyer’s offer if the broker lowers their 6% commission by 25%. If the broker accepts, they will receive:
- → When a broker wants to store documents electronically, the storage method may not allow the final documents to be altered. What method of electronic document storage is required by the Department of Real Estate (DRE)?
- → A broker receives a full price offer on a house they are listing. Before they present the offer to the seller, another broker brings in an all cash offer for $5,000 less. The listing broker is to:
- → A seller’s broker needs to disclose:
- → Broker Chuck listed a duplex for sale from a corporate owner. After entering into the listing, the officers of the corporation die in a plane crash. What happens to the listing?
- → If a 16-year-old emancipated minor wishes to sell real property, their broker may:
- → A broker who fails to promptly disclose their dual agency status is subject to:
People Also Study
Buyer Representation Agreement
8% of exam
Property Ownership
10% of exam
Land Use Controls and Regulations
8% of exam
Valuation and Market Analysis
10% of exam
Related Articles
Previous Question
A California real estate agent representing a buyer receives a bonus from a builder for each buyer brought to the builder's development. The agent does not disclose this arrangement to the buyer. Under California law, what is the primary legal problem with this situation?
Next Question
A California real estate licensee is retained solely to locate a buyer for one specific parcel of commercial property. Once that transaction closes, the agency relationship ends. Under California agency law, this licensee is best classified as which type of agent?