DUTIES OF REAL ESTATE BROKERS

Standing in a fiduciary relationship with their principals, real estate brokers are subject to the same highest duty of good faith and fair dealing imposed on trustees acting on behalf of their beneficiaries.

Brokers must observe the:

Even the seller's agent owes a limited statutory duty of inspection and disclosure to the buyer. But, absent "dual agency" situations (see other article) the seller's agent is not in a fiduciary relationship with the buyer and thus owes no fiduciary duties to the buyer.

Brokers must also observe the:

Brokers also have certain duties with respect to a prospective buyer and the inspection and disclosure of the condition of the property. Brokers have an affirmative obligation to conduct a "reasonably competent and diligent inspection" of residential property listed for sale and to "disclose to prospective purchasers all facts materially affecting the value or desirability of the property that such an investigation would reveal."

The disclosure duty applies to material facts affecting the value or desirability of the property and of which the broker is actually aware or should have been aware by a reasonable inspection.

For a breach of the duty to inspect and disclose known and knowable material facts affecting the value of the property, a seller's broker is subject to consequential liability to the buyer on a common law negligence or fraud theory. Brokers satisfy their duty to inspect and disclose by informing the buyer of the facts affecting desirability or value of the property. It is not up to the broker to disclose to the buyer the legal consequences or ramifications of the factual nature of realty or offer conclusions as to how those facts may adversely impact value.

The disclosure duty pertains to material facts. It does not include a duty to disclose opinions learned from others concerning how the practical ramifications of disclosed facts might adversely impact the property's value. There is a question whether these disclosures apply to the purchase and sale of commercial property. This obligation applies to selling brokers such that a selling broker has a duty to inspect and reveal to prospective buyers known or knowable material defects in residential property even though the broker is acting strictly as the seller's agent. On the other hand, a broker who is the buyer's agent (including a "dual agent") is a fiduciary for the buyer and may be held negligent as a fiduciary for failing to inspect the property and disclose reasonably discoverable defects to the buyer.

The duty is to first, to conduct a "reasonably competent and diligent visual inspection of the property"; and second, to "disclose to . . . prospective purchaser[s] all facts materially affecting the value or desirability of the property that an investigation would reveal."

A seller's agent has no duty under to independently verify or disclaim the accuracy of the seller's representations. The seller's agent is required to act in good faith and not to pass the seller's representations on to the buyer without a reasonable basis for believing them to be true. And, once the sellers and their agent make the disclosures, "it is incumbent upon the potential purchasers to investigate and make an informed decision based thereon." As stated above, the buyer’s broker must, in transmitting information from the seller (or others) to the buyer, either verify the information or disclose to the buyer that it has not been verified.