What background knowledge is needed for this Agency question?

Maryland's Residential Property Disclosure Act, enacted in 1994 and subsequently strengthened, requires sellers to disclose known material defects, but it also imposes independent duties on licensees who discover defects through their own observation or investigation. The intersection of fiduciary duty law and the disclosure act creates a two-layer protection for buyers: the seller must disclose what they know, and the buyer's agent must disclose what they discover, regardless of what the seller or seller's agent wants. This dual-layer system was designed after Maryland courts and MREC saw cases where buyers suffered significant financial harm because agents stayed silent about defects to preserve commission income.

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

Remember the phrase 'CRACK = CALL IT OUT' — any time you see a material defect in a question, your buyer's agent must call it out to their client immediately, no exceptions. Visualize Angela holding a giant red megaphone pointed directly at Carl the moment she sees the foundation crack, while the seller's agent tries to cover it with a tiny piece of tape — the megaphone always wins over the tape in Maryland agency law.

What exam tip applies to this Agency question?

When a question presents a scenario where a buyer's agent discovers a material defect and another party asks them to stay silent, the correct answer will always involve immediate disclosure to the buyer client — no negotiation strategy, no referral to MREC first, and no honoring of the other agent's request. Maryland examiners use these questions to test whether you understand that fiduciary duty to the client is the highest priority and cannot be subordinated to deal preservation or inter-agent courtesy.

How does this Agency concept apply in real world practice?

Angela and Carl tour a charming Cape Cod in Catonsville, and while walking through the basement, Angela notices a wide horizontal crack running across the foundation wall with visible water staining — classic signs of structural movement. The seller's agent pulls Angela aside and says, 'The owners are aware but they've had it monitored for years — let's not scare the buyer off.' Angela must immediately tell Carl what she observed, explain its potential significance, and recommend he hire a structural engineer before proceeding — her license, her fiduciary duty, and Maryland law all require nothing less.

AgencyFiduciary_dutiesMEDIUM

Maryland licensee Angela represents buyer Carl. During the transaction, Angela discovers that the home Carl wants to purchase has a material defect — a cracked foundation — that the seller has not disclosed. The seller's agent asks Angela not to mention it so the deal does not fall apart. What must Angela do under her fiduciary and legal duties in Maryland?

Correct Answer

B) Disclose the cracked foundation to Carl immediately, as her fiduciary duty to her buyer client requires disclosure of material facts

Angela owes Carl a fiduciary duty of disclosure, which requires her to inform him of all material facts that could affect his decision to purchase. A cracked foundation is clearly a material defect. Angela's duty to her buyer client overrides the seller's agent's request for silence. Concealing a known material defect would also violate Maryland's Residential Property Disclosure Act and expose Angela to disciplinary action by MREC.

Answer Options

Honor the seller's agent's request to keep the deal together, as her duty of obedience to facilitating the transaction takes precedence

Disclose the cracked foundation to Carl immediately, as her fiduciary duty to her buyer client requires disclosure of material facts

Report the defect to MREC but withhold it from Carl until MREC investigates

Negotiate a price reduction on Carl's behalf without disclosing the defect to avoid jeopardizing the transaction

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Related Concepts

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.

Customer vs Client

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.

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