What background knowledge is needed for this Agency question?

The duty to disclose known material facts in real estate transactions has deep roots in both common law fraud prevention principles and modern consumer protection legislation. Delaware's Agency Relationships in Real Estate Transactions Act extended this duty explicitly to transaction brokers to prevent licensees from using the non-agency label as a shield against disclosure obligations. Legislators recognized that a licensee who observes a serious property defect and remains silent causes real harm to consumers, and that the harm does not diminish simply because the licensee chose a facilitation role rather than a representation role.

What is a good way to remember the answer to this Agency question?

Use the phrase 'See It, Say It' to remember that any Delaware licensee — regardless of agency type — must disclose what they personally observe as a material fact. Visualize a traffic referee holding a flag: even if the referee is neutral and not rooting for either team, if they see a dangerous hazard on the field, they must flag it for everyone's safety. The transaction broker is the neutral referee — not on either team, but still required to call out what they see. The flag never goes away just because the referee is neutral.

What exam tip applies to this Agency question?

Questions involving transaction brokers and disclosure are specifically designed to test whether you know the difference between fiduciary duties (which transaction brokers do not owe) and statutory baseline duties (which all licensees owe regardless of relationship type). When you see a scenario where a transaction broker has observed or learned a material fact, the correct answer will almost always be that disclosure is still required — the non-agency status eliminates loyalty and obedience, not honesty and material fact disclosure. If an answer choice says a transaction broker has no disclosure duty at all, eliminate it immediately.

How does this Agency concept apply in real world practice?

Kim is facilitating the sale of a Sussex County beach cottage where Frank is selling and Helen is buying. During the walkthrough, Kim personally observes standing water in the crawl space and visibly rotting floor joists — conditions that could cost tens of thousands of dollars to remediate and could indicate ongoing structural risk. Even though Kim is acting as a transaction broker and owes neither Frank nor Helen fiduciary loyalty, she is legally required under Delaware law to disclose this observation to Helen immediately. Her failure to do so exposes her to license discipline, civil liability, and potential fraud claims, regardless of what Frank did or did not include on his disclosure form.

AgencyAgency_typesHARD

Delaware licensee Kim is acting as a transaction broker assisting both seller Frank and buyer Helen in the sale of Frank's Sussex County beach cottage. During a property walkthrough, Kim notices that the crawl space has visible signs of water intrusion and wood rot, but Frank has not mentioned this on his disclosure form. Kim says nothing to Helen about what she observed, believing her role as a transaction broker relieves her of the obligation to disclose. Under Delaware law, Kim's conduct is:

Correct Answer

D) Improper, because even a transaction broker in Delaware must disclose known material facts to all parties

Under 24 Del. C. § 2973, even a transaction broker in Delaware owes a duty of honest dealing and disclosure of all known material facts to all parties in the transaction. A transaction broker is not an agent and does not owe fiduciary duties, but the duty to disclose known material facts — such as visible water intrusion and wood rot — survives regardless of the agency relationship type. Kim's silence about the observed defect violates her statutory duties as a transaction broker.

Answer Options

Proper, because a transaction broker in Delaware owes no duty of disclosure to either party

Proper, because material defect disclosure is solely the seller's responsibility under the Residential Real Property Disclosure Act

Improper, because Kim should have immediately terminated the transaction brokerage relationship upon discovering the defect

Improper, because even a transaction broker in Delaware must disclose known material facts to all parties

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Related Concepts

Agency Relationship

A legal relationship in which one person (the agent) is authorized to act on behalf of another person (the principal) in business transactions with third parties.

Agency Termination

The legal ending of an agency relationship, which can occur through completion, expiration, mutual agreement, breach, death, incapacity, or bankruptcy of either party.

Confidentiality Duty

The fiduciary obligation to protect a client's private information and not disclose it to third parties without permission, surviving even after the agency relationship ends.

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