Seller disclosure obligations

Are the broker and salesperson responsible for a Seller’s failure to disclose a property’s known material defects, and if so, what are the ramifications to the broker and salesperson?

It depends. Under the Seller Disclosure Law, the Seller is responsible for disclosing known material defects afflicting the property. Both the broker of record and the salesperson involved in the transaction may share in that responsibility if they know about material defects and fail to disclose them. For example, when a property inspection report identifies material defects, not only is the Seller responsible for disclosing those defects to any subsequent buyer (assuming the first buyer terminates the Agreement), but so, too, are the listing broker and listing agent responsible to any subsequent buyer. This responsibility is multi-tiered; the broker and salesperson may have civil liability to the buyer (think money); however, the broker’s and salesperson’s real estate licenses could also be in jeopardy. 

How so? Section 35.292 of the State Real Estate Commission Rules and Regulations identifies the duties that licensees owe to all consumers, regardless of whether you maintain an agency relationship with the consumer. One of those obligations is to comply with the disclosure requirements of the Real Estate Sellers Disclosure Law. Under that law, a licensee may he held responsible if the licensee knew of a material defect that was either not disclosed by the Seller, or was misrepresented by the Seller. What sanctions the Real Estate Commission may impose upon you will likely depend on the severity of the defect not disclosed and the documentation (or lack thereof) that suggests the licensee’s level of complicity in not disclosing or misrepresenting the severity of the condition. 

Additional food for thought – a licensee’s responsibility is no less when selling property that you own. A real estate licensee can never escape the fact that he or she is a licensee.  Failing to disclose a material defect afflicting property that you own can also lead to discipline as well as to potential civil liability. Honesty is not only the best policy; it should be your ONLY policy. Allegations that you failed to disclose a material defect should be taken seriously when they arise, even if you are absolutely certain that you did everything right! When this situation arises, tell your broker at once!