This is not a question you want in your search history on your work computer, but it is a very good question. Of course, as a real estate agent, you should never conceal or lie about material facts. So, what information should you avoid disclosing? Surprisingly, the answer is not “none.” There is, in fact, a lot of information you must not disclose, even if asked directly about it. Having to balance these layers of truth may feel like an uncomfortable game of hot-and-cold with customers, and can rapidly make you appear untrustworthy. It is essential to know the disclosure laws in your state so you can avoid both awkward moments and lawsuits.
There are a variety of reasons for not disclosing certain information, some of which are extremely confusing. One of the more straightforward and universal laws against disclosure relates to avoiding discrimination. An agent can never assist the buyer or seller in discriminating against a federally protected class. For example, if a buyer asks what religion the sellers are, you cannot tell them, because this could help the buyer discriminate against people of a certain religion. Thus, you are legally required to obfuscate if the buyer asks you about the seller’s religion, race, sexual identity, or other groups protected against discrimination. The Ohio Association of REALTORS® says that agents “are often faced with questions from potential buyers about the racial composition of a neighborhood. Federal law, however, prohibits attempting to sell, or refusing to sell based on… racial composition… such questions should therefore not be answered” (emphasis mine). So if you can’t answer these questions, but you cannot legally lie, what are you supposed to say? If a buyer asks “what race is the seller?” it is usually best to say something like “I’m sorry, but I am not allowed to disclose that information.” Even questions like “what are the schools like in this neighborhood?” or “is there crime in this neighborhood?” should generally not be answered as well, since these questions are often used to discriminate against certain groups. It is usually best to answer by suggesting that the buyer do their own research. If the buyer demands an answer, you could say that you cannot give out demographic information that could relate to a protected class.
Once you get the hang of it, stating that you cannot disclose information relating to protected classes is fairly straightforward. However, there’s another level of fact avoidance that is much more difficult. For example, in certain situations, an agent does not have to disclose if there was a death or violent crime on the property. Though being dead is not a protected class, it is not considered to be a material fact in some jurisdictions, and therefore does not need to be disclosed. This varies by state; in California, a death in a house within the past three years must be disclosed to the buyer.
However, in Maryland, a homicide, suicide or felony on the property is “not a material fact” (Real Property Article, Annotated Code of Maryland, Section 2-120). This puts the real estate agent in a strange position, because only material facts have to be disclosed; even if a homicide on the property is a material fact for the buyer, state law nevertheless says that this is “not a material fact.” An agent must only disclose material facts, so if the seller says “do not disclose the homicide on the property,” the agent must obey the seller’s order, theoretically. Remember that the listing agent owes the fiduciary duty of obedience to the seller, not to the buyer.
Maryland lawyer Alvin C. Monshower writes that “If the licensee is aware of the death or felony and the seller is not willing to consent to its disclosure… then the licensee may not disclose such fact to a buyer or buyer’s agent, even when asked” (emphasis mine). Monshower also states that “this does not mean the licensee is entitled to lie about the situation… nor could you say ‘I don’t know’ when, in fact, you do know of such death or felony.” According to Monshower, Maryland statutes “do not authorize you to lie but merely state there is no duty to disclose such fact to a buyer.”
This puts the agent in an extraordinarily difficult position; what is a licensee supposed to say if they cannot legally lie, but also must obey the seller’s order to not disclose? Monshower writes that “The best response, as informally advised by the Maryland Real Estate Commission…. would be to simply say ‘…If you have any questions regarding death or criminal activity occurring on the property, you should contact the local police department.'”
This example, of course, does not apply across all states or all situations. It does, however, emphasize the importance of knowing your state and local laws regarding material facts and disclosure, so that you aren’t caught off guard. It only takes a few words to either violate your fiduciary duties, or violate your disclosure obligations to customers. If you’re in California, and you do not disclose a recent death, you could find yourself in serious trouble. However, in Maryland, if you do disclose a death, and your seller told you not to, you could wind up in trouble for violating your fiduciary duties to your seller.
Regardless of the state you’re in, if you’re selling a stigmatized property in which a well-publicized crime occurred, it’s often best to suggest that the seller might want to proactively disclose this event. Upfront disclosure can prevent buyers getting cold feet if they find out what happened on the property later in the transaction. If multiple buyers pull out at the last minute, this can make the property ever harder to sell.
As a real estate agent, it’s easy to feel like you can’t say anything at all about a property. For example, exaggeration (often called “puffing”) is not necessarily fraudulent, but even innocent-seeming exaggerations can cross the line into fraud. If you say something to a customer like “This yard is just stunning” even though it’s absolutely heinous, you are likely not committing actionable fraud. However, the line between puffing and misrepresentation is as important as it is vague. Remember that buyers often don’t know that you aren’t an inspector, and perhaps don’t even know what exactly a home inspector does. If you casually say to a buyer “I looked through all rooms and this place is in great condition with no obvious problems,” the buyer might think you just performed a complete home inspection. Knowing what not to say is one of the most essential skills in the practice of real estate.
The disclosure dance is intricate, but essential to learn. Remember that lying is almost never legal; there is a massive legal difference between lying and simply not disclosing a fact that does not legally need to be disclosed. Of course, any fact the buyer considers material–or that a reasonable person would likely consider material–must be disclosed, unless specific laws state otherwise.
1) Ohio Association of REALTORS®, (n.d.) Fair Housing, OHIO REALTOR®, https://033ff13.netsolhost.com/ohiorealtors/legal/topics/fair-housing/, accessed 3/7/2023
2) Alvin C. Monshower, Jr., Esq. (2011) A Homicide, Suicide, Accidental Death, Natural Death Or Felony Occurs On The Property – Must A Licensee Disclose Such Fact To A Buyer? Monshower, Miller & Magrogan, LLP, https://www.monmilmag.com/articles/death-or-felony-occurs-on-the-property-must-a-licensee-disclose-such-facts/, accesed 3/7/2023
