Connecticut broker Steven represents seller Donna. After 60 days on market, an investor submits an all-cash offer at $420,000 — $30,000 below the asking price. Steven personally knows the investor and stands to receive a referral fee from the investor's company for future business. Steven presents the offer to Donna but does not disclose his financial relationship with the investor. Donna accepts the offer. Which of the following best describes Steven's conduct?
Correct Answer
B) Steven violated his duty of loyalty and disclosure by failing to reveal a financial interest that creates a conflict with Donna's interests
Steven violated his fiduciary duties of loyalty and disclosure. Under Connecticut agency law, a listing broker must disclose to the seller any financial interest or relationship that could influence the broker's conduct in the transaction. Steven's expectation of future referral fees from the investor's company creates a material conflict of interest that Donna has the right to know about before deciding whether to accept the offer. Failing to disclose this relationship violates both the duty of loyalty (by allowing a personal financial interest to potentially influence his advice) and the duty of disclosure (by withholding a material conflict). This conduct may also violate CUTPA (CGS § 42-110a).
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Related Topics & Key Terms
Key Terms:
Related Concepts
An arrangement where a brokerage assigns separate agents within the firm to represent the buyer and seller in the same transaction, allowing each client to have dedicated representation.
A situation where a single agent or brokerage represents both the buyer and the seller in the same real estate transaction.
An agency relationship created by a clear, explicit agreement between the principal and agent, either orally or in writing.
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