Being a Realtor and member of both the National Association of Realtors as well as the Washington Association of Realtors. I get a weekly legal Q&A. As a Real Estate Broker I must stay up to date regarding laws as they apply to Real Estate. Some of these questions (I think) would be interesting to the general public. This week’s Q&A involves creative ways people have come up with to burglarize homes.
Question:
Buyer and broker signed a buyer agency agreement with buyer wanting to view very expensive homes. Now, broker is realizing that most if not all of the financial information buyers provided is false. When buyer has entered a purchase agreement, they have terminated just before EM is due. Broker believes buyers are using broker to view homes prior to burglarizing the home. Local law enforcement supports this theory.
1. Is broker still required to honor the Buyers agency agreement?
2. How does the Real Estate Law of Agency impact this situation? Specifically Section 7(b) “Not disclosing confidential information” … what if the information is not correct anyway and when it may prevent a crime and both the police and the MLS want broker to file “Suspicious Activity Reports”. May broker disclose what broker actually knows of these buyers?
3. In Form 21, paragraph a, there is the provision where buyer represents having sufficient funds to close. What must broker disclose to a seller if broker knows buyer lacks the funds?
Answer:
Recall broker’s Agency Law duty to disclose material facts: “Licensee is required to disclose all existing material facts known by the licensee and not apparent or readily ascertainable to a party which adversely affect the physical condition of or title to the property. For licensees, a material fact is defined as information that substantially adversely affects the value of the property or a party’s ability to perform its obligations in a real estate transaction or operates to materially impair or defeat the purpose of the transaction.”
Buyer’s broker now knows that buyer seemingly lacks the financial wherewithal to complete a transaction of the sort contemplated by any purchase agreement buyer may enter. Buyer’s broker must disclose that information to any seller. It seems a potential solution to broker’s problem is disclosure to buyer that broker must disclose to any seller that buyer lacks the financial wherewithal to complete the transaction.
Unless buyer can correct misinformation on broker’s part, buyer is not going to want broker writing offers for buyer and disclosing buyer’s dishonesty and lack of financial strength to seller. Confronted with this truth, buyer is likely to determine that buyer no longer wishes to work with buyer’s broker and buyer and broker will be able to agree to terminate their agency relationship and agency agreement.
It appears from the question presented, that buyer gave broker certain information and broker, using his own devices, determined that information to be false. If that is the case, then the falsity of the information is not confidential information, because buyer did not provide the information to broker. Broker learned the information on his own. If those are the facts, then broker is under no obligation to conceal the information and may share it with law enforcement and broker’s MLS, in broker’s discretion.
This is an interesting situation. At the end of the day, however, neither the Department of Licensing nor a court room judge is going to hold a broker responsible for breaching a buyer agency agreement if performing the agreement would have resulted in broker aiding and abetting the commission of a crime. Broker must be certain that broker is not misinformed about buyer’s financial wherewithal and/or the veracity of the information buyer provided. If broker is properly informed, then broker simply needs to find a way to confront the buyers and terminate the agreement. Perhaps the first step is for broker to present his information to buyers and ask buyers to explain the inconsistencies. If buyer cannot explain the inconsistencies, then broker likely has his answer.
If broker has any question as to how to proceed, after talking with his managing broker, broker should consult legal counsel
Hotline Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week.
The Legal Hotline lawyer does not represent Washington Association of REALTORS® members or their clients and customers.
