A seller in Terre Haute accepts a buyer's written offer on Monday. On Tuesday, before closing, the seller receives a significantly higher offer from a second buyer and asks her listing broker — a licensed Indiana broker — to help her get out of the first contract by telling the first buyer that the property 'had an inspection issue' that was not disclosed. The listing broker knows this statement would be false. Under Indiana law, what is the listing broker's proper and legally required response?
Correct Answer
B) The broker must refuse, because making a false statement to induce contract termination violates IC 25-34.1 and the Indiana Deceptive Consumer Sales Act, and could result in license revocation
Under IC 25-34.1, Indiana licensees are prohibited from engaging in fraud, misrepresentation, or deceptive practices in real estate transactions. Making a false statement about an inspection issue to induce a buyer to terminate a valid contract constitutes fraud and misrepresentation. Additionally, the Indiana Deceptive Consumer Sales Act (IC 24-5-0.5) prohibits unfair and deceptive acts in consumer transactions including real estate. The broker must refuse this instruction regardless of the seller's wishes. Complying could result in license suspension or revocation, civil liability, and criminal exposure. A broker's duty of loyalty does not extend to participating in illegal or fraudulent conduct.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
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