Take the Money and Run: An Ethical Dilemma

Sometimes a real estate agent will have confidential information. The ethical question is whether or not they can disclose that information to their client.

Well, it all depends, sometimes “yes” and sometimes “no”.

Fred is a real estate agent and he has been working with Barney, a potential buyer, for about a year. Barney wants an inexpensive waterfront property where he can build a cottage. Fred works in the area and frequently has waterfront listings that may be of interest. So far, they have all been too expensive.

Fred has Barney sign a Buyer Representation Agreement, meaning that there is an agency appointment and Fred owes fiduciary duties to Barney.

Robert Jones has a property and he has spoken to several agents. He called Fred with the intention of listing the property. Robert ultimately decided to list the property with Betty.

Fred knows that this property would be very suitable for Barney. It’s the right price.

Fred has somewhat of an ethical dilemma. When he went on the Listing Presentation and Interview, Robert confided in him, with the following information:

  • The premises were filled with bed bugs, apparently one of the renters from last year brought them in.
  • Five years before he bought, one of the former owners had committed suicide in the cottage.
  • He recently found out the property was “reclaimed” land, and the fill that was used had been dumped there from a contaminated site.

Fred told Robert that all these matters need to be disclosed. Robert refused, did not list with Fred, and moved on to Betty, but she doesn’t know about any of this.

Can Fred tell Barney, his Buyer?

A good number of real estate agents will simply say “yes”:

  1. Barney is my client,
  2. I will tell him everything that I know,
  3. So “disclose, disclose, disclose”.

Is that the correct answer?

Some other agents will say “no”:

  1. Fred had a duty to protect Robert’s confidential information,
  2. That duty arose out of an implied agency arrangement,
  3. The information was disclosed in confidence and expected to remain in confidence,
  4. So, “keep quiet, keep quiet, keep quiet”.

Resolution of the Dilemma

In my view, “no” is the correct answer. You don’t have to make money out of every potential deal.

Perhaps, Fred should just “pass” on this one. Don’t tell Barney. That was Fred’s secret.

As difficult as it may happen to be, the correct ethical solution is often:

  1. Turning down the listing,
  2. Refusing to bring a Buyer to the table, and
  3. Not double-ending the deal.

So, RUN and “don’t take the money!”

Brian Madigan LL.B., Broker


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