Acting as a subagent, Lucy shows a property to a buyer. She notices water stains in the carpet near the entrance to the guest bathroom and on the vinyl tile at the back door. The buyer is greatly interested in the property. What could Lucy do legally; could she point out the conditions to the buyer without first speaking to the listing agent or say nothing?
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In this case, there is no real difference between the responsibilities of an agent and a subagent. In both cases, the agents have a fiduciary duty of disclosure of material facts relevant to the sale. Evidence of water damage would constitute a material fact. If the buyer noticed the stains, the subagent should immediately offer to do additional research on them to find out how they were caused and the severity of the underlying damage. If the buyer does not ask about the stains, the subagent has time to call the listing agent, get more information, and then disclose that information before the buyer actually puts together an offer. In either case though, the subagent has an obligation to reveal the details of the water damage.
On a practical note, volunteering information about the water damage builds trust. If an agent keeps silent and the information then shows up (as it will) on a home inspection report, it makes the agent look bad. Thus complete disclosure of material facts, as well as being a legal and ethical obligation, also helps build a positive relationship with buyers.
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