One of the most important considerations when buying real estate is the physical condition of the property. It would be financially devastating to purchase a house only to later discover the foundation is crumbling or the walls are full of dry rot. Although the seller should be the primary source for such information, the broker, too, may have inside access to key facts. The question is, how much of this information must the broker pass on?
A real estate broker representing a seller has certain duties to disclose information about a property’s physical condition to potential buyers. As a buyer, knowing what brokers must disclose will help ensure you are getting a full picture of the property you purchase. As a seller, it is important to know what your broker must tell buyers so that you can properly advise the broker and avoid liability for misrepresentation.
Brokers representing sellers have a duty to disclose to potential buyers any material, adverse information they actually possess about the physical condition of the property. (DC Code § 42-1703(a)(2).)
Information is material if it would cause an ordinary person to not want to go through with the real estate transaction, and it is adverse if it is negative. Material, adverse information is usually regarded as any information that would reduce a property’s value.
For example, if the broker knew that there was a restriction on the property against planting tall trees because they may block the views of others, the broker may not be required to disclose it because, while annoying, it would likely not negatively affect the property’s value. On the other hand, if the restriction also required the homeowner to allow the public to cross the property to get to a vista point, the broker would have to disclose this. Having a public easement across private property would lower the property’s value.
This disclosure duty is limited because the broker must also have actual knowledge of the material, adverse information. If, for example, a seller knows the house has dry rot but does not tell the listing broker, and the broker has no reason to suspect the presence of dry rot, the broker has no duty to tell potential buyers.
This doesn’t mean that a buyer has no recourse if something like this were to happen. Sellers, even if they are represented by brokers, have duties to make certain disclosures about their property—remember, the seller in this example knew about the dry rot. See "Selling Property in Washington, DC: What a Seller Must Disclose."
In addition to disclosing material adverse facts, brokers have a general duty to be honest in their dealings with prospective buyers of property. (DC Code § 42-1703(a)(2).) One consequence of this is that a broker can’t turn a blind eye to red flags about a property’s condition.
As discussed above, a broker must only disclose adverse facts of which the broker has actual knowledge. Because the broker must also always be honest with buyers, the broker cannot ignore obvious problems in order to later claim ignorance. For example, if the seller told the broker that the house did not have dry rot but the broker could plainly see signs of dry rot, the broker cannot rely on the seller’s blatant lie in order to tell the buyer that there is no dry rot.
There is no set time or method for brokers to make disclosures about the property’s physical condition. Once the seller makes the official seller disclosure to the buyer, the law assumes that the broker has also disclosed all information unless the broker says otherwise. Therefore, if a broker learns material, adverse information that the broker knows was not included in the seller’s disclosure, the broker must make sure the seller amends the disclosure. Otherwise, the broker must disclose the information to the buyer to avoid be subject to potential liability for fraud or misrepresentation. (DC Code § § 42-1307 and 42-1311.)
For the timing and method of seller disclosures, see "Selling Property in Washington, DC: What a Seller Must Disclose."
While a seller’s broker does have certain duties to inform buyers about the property’s condition, these duties are limited. As a seller, you may want to get professional legal advice to learn what you and your broker are required to disclose. And if you’re a buyer, be cautious and do not rely solely on what the seller’s broker tells you.