Agent Morrison in Kentucky represents buyer Lane in the purchase of a residential property. After the purchase contract is signed, Agent Morrison learns from a neighbor that the property's basement has flooded twice in the past three years due to a drainage problem — a fact not mentioned in the seller's disclosure. The seller's agent claims the flooding was a one-time event that has been corrected. Closing is scheduled in 10 days. What is Agent Morrison's most appropriate course of action under Kentucky agency law?
Correct Answer
A) Immediately disclose the neighbor's information to Lane and advise Lane to consider requesting an inspection contingency extension or further investigation before closing
Under Kentucky agency law (KRS Chapter 324 and 201 KAR 11:121), Agent Morrison's fiduciary duty of disclosure and reasonable care to buyer Lane requires immediate disclosure of the neighbor's information about the basement flooding. This is a potentially material fact that could significantly affect Lane's decision to proceed with the purchase. Agent Morrison must inform Lane promptly and advise Lane to consider options such as requesting additional time for inspection, negotiating repairs, or re-evaluating the transaction. The agent's duty continues through closing and is not suspended once a contract is signed.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
In real estate, a client is someone to whom the agent owes fiduciary duties through an agency relationship, while a customer is a third party to whom the agent owes only honesty and fair dealing.
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.
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