Derek, a licensed North Dakota salesperson, is listing a home in Bismarck for seller Carol. During a walkthrough, Derek notices what appears to be water staining on the basement ceiling, suggesting a possible roof leak. Carol tells Derek she is unaware of any leak and instructs him not to mention it to buyers. The property condition disclosure form Carol completes makes no mention of water damage. Under North Dakota law and NDREC rules, what is Derek's most appropriate course of action?

Correct Answer

B) Disclose the observed water staining to prospective buyers as a material fact, regardless of Carol's instructions

Under North Dakota Administrative Code Title 70 and NDCC Chapter 43-23, a licensed salesperson has an independent duty to disclose known material facts to all parties in a transaction, regardless of the seller's instructions to the contrary. Water staining visible to Derek constitutes a potentially material fact about the property's condition. Derek cannot suppress this information simply because Carol instructs him to do so — following such instructions would expose Derek to disciplinary action by the NDREC and potential liability for misrepresentation or fraud. The licensee's duty to disclose material facts is non-waivable by client instruction.