Explanations

This scenario describes a secret profit. A secret profit occurs when an agent makes an undisclosed financial gain from a transaction on behalf of a principal, without the principal’s knowledge or consent. In this case, the broker purchased the land at a lower price for himself and then sold it to his client at a higher price, keeping the difference. This action directly violates the broker’s fiduciary duties to the client, particularly the duties of loyalty and full disclosure of material facts. Real estate law requires agents to disclose any hidden profit or ownership interest in a transaction. Such a breach can lead to severe consequences, including loss of commission and potential legal action.

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