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.
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