Explanations

Agency relationship disclosure is a critical component of real estate transactions,

serving several important purposes:

• Required by statute (A): In California, various state laws, such as those administered by the Department of Real Estate (DRE), mandate specific disclosures in real estate transactions, including those related to agency relationships. For instance, an agency disclosure form explaining the duties of different agents is required to be signed by both the buyer and seller before entering a residential purchase agreement. All real estate transactions, regardless of property type, require agency disclosure.

• Ethics and professional responsibility (B): Real estate agents owe fiduciary duties to their clients, which include loyalty, honesty, and full disclosure of material facts.

Disclosure helps prevent conflicts of interest and ensures that agents act in their clients’ best interests. Failure to disclose can lead to DRE fines, license suspension, or revocation, and civil lawsuits.

• Clarify responsibility (D): Disclosure forms explain the duties owed by seller’s agents, buyer’s agents, and dual agents. This transparency ensures that both principals and third parties understand who the agent represents and what duties are owed to each, which helps prevent misunderstandings and potential legal disputes

Imputed notice (C), also known as imputed knowledge, is a legal doctrine that states information known by an agent is presumed to be known by their principal, even if the agent didnot explicitly share it. While this doctrine is a consequence of an agency relationship and impacts vicarious liability, it is not a reason why disclosure is required. Instead, comprehensive disclosure helps to manage the risks and implications that arise from the principle of imputed notice by promoting transparency and ensuring all parties are informed.

Pages: 1 2 3