Do I Have To Tell?

By Jim Palmer Jr.

What if someone died in a home? Is the real estate broker obligated to disclose this information? This question has a complicated answer! Let’s say that the seller instructs a broker to withhold such information from buyers since they feel that if that fact was disclosed, buyers may be discouraged from buying. The answer is two-fold. First, the broker does owe a duty of loyalty to the seller, but is only obligated to perform duties that they have agreed to, and are NOT obligated to “fiduciary-like” duties which would be to do whatever the seller bids them to do. Secondly, the Agency Law requires a duty to ALL parties regardless of agency, to provide brokerage services with honesty and good faith. Thus, if a buyer asks the listing broker a question like that above, the broker is obligated by law to disclose the truth.

But not so fast! The broker is also obligated to disclose any conflicts of interest to their client, so this question poses a problem if the agent has agreed to their gag order concerning the death in the home. Most would agree that it would be quite awkward for the listing broker to halt a conversation with the buyer in response to a question so simple as to whether there has been a death in the home, to go announce to the seller that a conflict of interest now exists. Since that approach is silly and doesn’t mirror reality, it would require the broker and seller to have a plan ahead of time for how they would answer this question truthfully.

The Agency Law requires brokers to disclose any known “material fact”, which is narrowly defined and does NOT include the fact or suspicion that the property or a neighboring property, is or was the site of a murder, suicide or other death, rape or other sex crime, assault or other violent crime, robbery or burglary, illegal drug activity, gang-related activity or other act, occurrence or use. Material facts consist of only those issues that adversely affect the physical condition of or title to the property.

Some of these types of issues, such as the known existence of a convicted sexual predator in a neighborhood, can cause much anxiety for real estate brokers. Many such brokers choose to disclose, erring on the side of emotion to protect the innocent, thus risking potential consequences because of agency violations.