Forums » Ethics
Should you tell them....?
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"So how do you like the neighborhood? You know we have to have a good place for our kids and us." the buyer asked the agent upon entering the property they were considering buying.
"Well, there were a few robberies in the last few months, and some domestic violence in the neighboring streets." replied the agent.
Was this response proper by the agent to the potential buyers?
Yes it was. The agent knew of an event that might pose an issue for the buyers, thus the agent has to disclose what they know.
Remember, the key is to MAKE THE BUYER AWARE of what you know, to protect your client, as well as yourself in the real estate transaction. If you do not know the answer, then others might.
If, for example, the agent does not know that the area has problems or perhaps might pose a threat or a "deal breaker" for the buyers, then the agent needs to let the buyers know that they can contact their local police department and ask questions, or simply search the internet for their statistics.
Proper search terms would be, as an example:
Neighborhood Crime in _________ (fill in the blank with the town, city or zip code)
Safety Neighborhood Statistics in _______ ( fill in the blank with the town, city or zip code)
What is the Crime Index in_________.... You get the idea. Just search the terms of your questions. There are FBI reports, sex offender reports, and a huge variety of statistics right in front of you.
Also, many title companies can provide with a property profile statistics for schools, businesses and other important factors as well.
Remember, to tell them what is important to THEM, so you are truly there to help and do a good service.
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This could be absolutely the wrong response in some states where fiduciary duties are defined and client relationships versus non-client relationships determine how (or for that matter whether or not) questions are answered. Licensees have an important obligation to understand and operate within the law. Being "helpful" and providing "good service" is not a guarantee that one is operating within the law! -
That is not quite true and here is why. Most people forget that fiduciary duties and requirements under a certain license are just the begining of obligations one has. They forget about the standard contract and tort laws, standard of industry practices, factors which are material in a contract and materially can affect the decision of a client had they known about that certain something that was not disclosed, and then of course your state and federal laws as well as exceptions to the laws under another law, and jurisdictional laws. The list is long, and does not stop there. Some people have spent a lot of money and even jail time because they thought as long as they do what their fiduciary duties were and abide under their license requirements or company rules, all is well. There is no guarantee ever stated that a good service makes you fully lawful. There is a lot more than that. You have to look at the big picture, not the just a small corner of the facts. That is why we have attorneys to go to and ask for help and advice as well as our own good honest common sense. The general good faith rule applies in all types of transactions. More people lost not following it then were being hurt by it. Be honest from the first step. The good faith issue is in everything. So, do tell the truth, do not hide it. Be honest. Dishonesty, covering up facts, lying to clients, forging, etc. etc. are all issues that will not stand on the right side of any affair. If it is material information that someone needs to know to any transaction, they need to be told. If you cannot tell them for what ever reason, step down, and let someone else take over. That action is also classified as honest " I cannot do it, but here is someone else who might be able to". Don't lie to them, and do tell it like it is. Cleaning up a mess is a lot harder than not creating one in the first place.
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Sorry, but I am not looking at "one small corner" of the facts. I also am not recommending dishonesty, nor did I say "only do your fiduciary duties." I am not suggesting hiding things. Quite frankly I am thoroughly disgusted with the dishonesty and self-serving practice that pervades this industry. I am suggesting simply that just "being honest and telling everything" will not keep the agent out of trouble. Your recommendation to disclose everything would not be a lawful response under several conditions in the state I practice in.
I agree that there is a large body of law to deal with... but your generality is simply not true in every state and in every situation.
This is also one of the examples I'm thinking of... are you qualified to advise licensees in every state to "tell it like it is?" Perhaps honesty would require an acknowledgement that you are not intimately familiar with real estate law in all 50 states.
Note that I said "could be wrong" not "would be wrong." I can tell you this: if an agent practices in my state using the "tell everything" advice you seem to be offering, he or she will eventually end up in court. Perhaps you would be willing to defend him or her when the time comes. Personally, I'd rather not end up there in the first place.
Not understanding the law, fidiciuary duty, agency, etc. will create a lot more of a mess than giving thoughtful, accurate responses.
This post was edited by Walter Boomsma at February 26, 2012 4:52:21 AM MST -
Perhaps you can give a specific example and the state you are referring to: in terms of where the disclosure is a material fact to the contract and revealing it is against the law, and non-disclosure can mislead or cause damages to the client, but if you were to disclose it you are violating the law. I would love to hear a very specific example, and let us go from there. Of course, please do not use any maritime, military, attorney or governmental top secret examples, because that is obviously different, and I highly doubt the forum readers here are looking for something on that issue. The basic standards of good faith, and fair dealings as well as disclosures, and non-misleading issues are the core to the laws. I am aware, that Delaware is different in a lot of their laws and how they enforce the laws, and record keeping in the courts, but even there, the main laws about honesty and disclosure will not subject you to punishment. So, I am looking forward to your example...If you have a specific statute in mind, feel free to insert it into your explanation as well. Thanks.
This post was edited by Beata Ballo, J.D. at March 4, 2012 9:25:44 PM MST -
I have no desire to play attorney and debate this endlessly... Partly because we are obviously on very different pages and I don't think you are understanding my point. I will repeat again, I am not against honesty. I understand good faith and fair dealings.
However, you are stating a generality and it seems to me offering the legal opinion that licensees will not get into trouble if they "tell everything." That is your opinion and you are welcome to it... but not every one (including judges) will agree with you in every situation. "Telling everything" does not automatically equate to good faith and fair dealings. Ultimately this question will be resolved in court, not on a forum.
We also need to remember that criminal and civil court are going to be different... and that the licensing authority in most states has the ability to create and enforce their own rules.
My point was and is that licensees need to think hard and careful before just simply "telling everything." I'm not sure why you disagree with that.
For example, Maine has no law requiring the disclosure of stigmatized property.
If I list such a property and the seller client instructs me not to reveal the stigma I would certainly discuss with the seller the merits of disclosing versus not disclosing.
If after that discussion the seller still instructs me NOT to disclose, I'd better not offer that information ("tell everything") to a buyer who is not my client. (Maine also makes important distinctions between clients and customers.)
I would, however, need also to tell my seller client that should I be asked about the stigma I must reply honesty to direct questions regarding items I "know and should have known."
Offering the information after being instructed not to would be a problem - answering a question honestly would not. It's not really that complicated, but it can't be oversimplified.
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Well, since I posted the article and you are debating the validity of what I stated, a concrete example would be nice. I understand if you do not have one, because it would be very difficult to create one, unless you do have a specific example.
Ironically, my statements are not as general as one may believe. Most people believe what is under their license requirements is only (or mostly) what they need to adhere to, or follow. Some believe if they follow those rules exactly, they are ok. Sadly, that is not the entirety. The rules under licenses are many times not enough to abide by rules of the law. Just because under a license a rule may not have been violated, it does not mean the law was kept.
In your example you had given is a wonderful issue. So, technically, you did have one that was specific enough to comment on. I appreciate it.
Now, your example of Maine and no duty to disclose stigmatized property is only a part of the issue. However, stigmatism as you know but I will define for the rest of the readers, indicates "to characterize or brand as disgraceful or ignominious", is requested not to be disclosed by your sellers, does not mean necessarily that you are not obligated to disclose to a buyer, as long as it is a material part of their contract. The key is MATERIAL part of their contract.
Thus, if a client, a buyer, tells you that they are looking specifically at a property that is not stigmatized, then you have to reveal “it”. Of course, the issue on stigmatism also goes on to what one means specifically about it, and the exact term and meeting of the minds on the details of stigmatized property, what "it" is that needs disclosure.
Where one may think it is stigmatized because of a certain neighbor who does not cut their lawn next door or to someone else who considers that a stigmatized property is one that is in violent gang area, clearly indicates that the responses will be different for disclosure purposes.
So, you might want to clarify what your seller means and what your buyer does. Ultimately what is the major issue and what each client wants to "hide" or "wants to know" is the key and what the MATERIAL part of that contract is. I emphasized the word “material” because that is such a key term. If that information goes to a detail that is so important to the client that it would make them change their mind, had they know about that issue, is a material part. If that issue can make or break a contract, a disclosure is necessary, or the law may be violated. The client usually will come back and say “… had they know about that, they would have done this, or done that…”. So one buyer may not care that the stigmatized property is characterized as such because of the neighbor not cutting the lawn next door, then if your seller asks you not to disclose that information, you do not have to. It is meaningful to your seller but not to your buyer.
However, primarily, when you take the listing, you must tell your client that you do have to be honest, and if a buyer has a specific request about the information regarding their home that is a material information to the buyer, and that is what your seller wants to hide, not disclose, not mentions, cover up, etc., etc., then you will not be able to do that.
Also, offering information that you are instructed not to reveal might be a problem if it does go to the material part of that contract. Just because your client tells you to do something, or not to do it, does not always mean it is the correct or incorrect path to take. So use your good logical deductive thinking… which sounds like you have, so you should not have to worry about much at this point. Remember, Material part of the contract is your major issue when it comes to disclosures and good faith on contracts.
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Your first paragraph reveals an erroneous assumption. My first post was not made to start a debate with you. This is a forum. I posted thinking that is different from yours so that others would have an opportunity to think about the topic and make their own informed decision. That is the value of a forum. Forums aren't intended to establish who is right.
I fully intend to continue to practice (and teach pre licensing courses) the way I do. I do hope others who read this forum will give careful consideration to what they disclose when. I would also suggest that in a particularly difficult situation, licensees consult with a qualified attorney.
Note also that not all attorneys will agree. One of the better attorneys I know says, "we can't always know the right answer until every phrase in every contract and document has been litigated." The most difficult controversies end up being decided in court--not on an Internet forum.
One will not avoid court by thinking one is an attorney--even if he or she owns a Black's Law Dictionary. Laws regarding any topic will often conflict and part of the difficulty is deciding which law will trump another.
Disclosures in the real estate business are just not always that simple. In my experience "loose lips" cause more problems than careful consideration. -
The actual area herein is the forum but what is discussed is left open to the issues and responses. Thus, the response types may be classified accordingly. If you are teaching pre-licensing courses, I hope you cover the honesty of disclosures. I cannot recall actionable legal cases (precedent case law), lawsuits and license revocations where too much disclosure was made to a client in a real estate transaction. However, most people will fall on short grounds when they do not disclose enough relevant details which are material to the contract. If anyone is practicing any type of disclosure format based on Black's Law Dictionary, I say run the other way. Their information is super limited and ignores the Civil Procedures, Constitutional Law, Case Law as well as Criminal Proceedings and many other areas, where one may hit an ankle on if they do not disclose relevant information to the contract. Again, the key is to tell the truth, discuss the factors that can make or break a contract. This is not an opinion, but a fact. This is not being loose lipped. Most lawsuits happen because someone tried to save their deal and had sealed lips. If you have the choice, then tell the truth. Anything less is not acceptable if it means to misleading someone intentionally or negligently, or hide a material fact to the contract (fraudulent action can arise out of this). This is true not just in the States, but outside the US as well. Laws do contradict each other in many cases, and as I had stated earlier, one must look at the totality of the circumstances to make logical conclusions. There is no need to drop one's brain on the floor and not use it just because they think a dictionary had the answer to their question. Most issues are due to lack of disclosures not due to too much. Consult not just one attorney but several. It is no defense in any court that one followed a bad legal advice. So ... disclose that material fact... And that is a fact.
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The internet does have some very good sources. It is how they are sought after and checked to make sure it is accurate. Not all sites have good information, that is why research is a key factor on accuracy. So, just check the records and make sure the data is clear and what it should be. True numbers do not lie.