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Real Estate · State Agency and Disclosure Requirements

What is a licensee's general duty to disclose known material defects in a property?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

Disclose known material defects affecting the property's value or desirability to the parties as required, even though the licensee owes fiduciary duties to their own client

  1. A Disclose known material defects affecting the property's value or desirability to the parties as required, even though the licensee owes fiduciary duties to their own client
  2. B Disclose only defects the buyer asks about
  3. C Conceal defects to help the seller
  4. D Never disclose anything to the other side

Why this is the answer

Even while owing fiduciary duties to their client, a licensee generally must disclose known material defects — significant physical or other conditions affecting a property's value or desirability — to the parties, and must not conceal or misrepresent them. A seller's agent cannot help hide a known defect from a buyer, and most states require honest disclosure of material facts to all parties regardless of who the agent represents. Latent (hidden) defects known to the licensee are especially important to disclose. The specific disclosure forms and the line between a 'material' defect and minor issues vary by state, but the duty not to conceal known material defects is a consistent state-portion principle.
Source: Real Estate State Portion, Material Defect Disclosure

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About this topic: State Agency and Disclosure Requirements

State agency and disclosure requirements cover the agency relationships the state recognises, the written disclosures and when they must be given, and the property-condition disclosures required of sellers and licensees. This is one of 11 Salesperson (State Law) questions on state agency and disclosure requirements, each with a full explanation on a single study page.

New to this exam? Our Real Estate exam guide explains the format, scoring, and how to prepare.

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State-specific guides

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