Broker Pat at Red River Realty in Grand Forks represents both the buyer and the seller in a transaction under a properly executed dual agency consent. During negotiations, the buyer privately tells Pat that the property has a structural defect the buyer discovered independently and that the buyer wants to use this as leverage to reduce the price. The seller is unaware of this defect. Under North Dakota dual agency rules, what is Pat's obligation?

Correct Answer

A) Pat must keep the buyer's negotiating strategy confidential but must independently disclose the structural defect to the seller as a material fact.

This question tests the intersection of two distinct duties in North Dakota dual agency. First, the buyer's negotiating strategy (using the defect as leverage) is confidential information Pat received from his buyer client and must not be disclosed to the seller. Second, a known structural defect is a material fact about the property's condition. Under North Dakota law (NDCC Chapter 47-10.1 and general agency duties), a licensee has an independent duty to disclose known material defects affecting property value or desirability to all parties, regardless of agency status. This duty to disclose material facts exists separately from — and survives — the confidentiality obligation. Pat must keep the negotiating strategy private but must disclose the structural defect as a material fact.