Article 1: When representing a buyer, seller, landlord, tenant, or of the client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation of absolute fidelity to the client's interests is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant, or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly.

Article 2: REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency duties owed to their clients.

REALTOR® Sellers owned a home which he listed through his own brokerage firm. The property was filed with the Multiple Listing Service of the Association. REALTOR® Buyer called REALTOR® Sellers and told him of his interest in purchasing the home for himself. REALTOR® Sellers suggested a meeting to discuss the matter. The two agreed upon terms and conditions and the property was sold by REALTOR® Sellers to REALTOR® Buyer.

A few months later during hard rains, leakage of the roof occurred with resultant water damage to the interior ceilings and side walls. REALTOR® Buyer had a roofing contractor inspect the roof. The roofing contractor advised REALTOR® Buyer that the roof was defective and advised that only a new roof would prevent future water damage.

REALTOR® Buyer then contacted REALTOR® Sellers and requested that he pay for the new roof. REALTOR® Sellers refused, stating that REALTOR® Buyer had a full opportunity to look at it and inspect it. REALTOR® Buyer then charged REALTOR® Sellers with a violation of Articles 1 and 2 of the Code of Ethics by not having disclosed that the roof had defects known to REALTOR® Sellers prior to the time the purchase agreement was executed.

At the subsequent hearing REALTOR® Buyer outlined his complaint and told the Hearing Panel that at no time during the inspection of the property, or during the negotiations which followed, did REALTOR® Sellers disclose any defect in the roof. REALTOR® Buyer acknowledged that he had walked around the property and had looked at the roof. He had commented to REALTOR® Sellers that the roof looked reasonably good, and REALTOR® Sellers had made no comment. The roofing contractor REALTOR® Buyer employed after the leak occurred told him that there was a basic defect in the way the shingles were laid in the cap of the roof and in the manner in which the metal flashing on the roof had been installed. It was the roofing contractor's opinion that the home's former occupant could not have been unaware of the defective roof or the leakage that would occur during hard rains.

REALTOR® Sellers told the panel that he was participating only to prove that he was not subject to the Code of Ethics while acting as a principal as compared with his acts as an agent on behalf of others. He pointed out that he owned the property and was a principal, and that REALTOR® Buyer had purchased the property for himself as a principal.

Was REALTOR® Sellers in violation of Articles 1 and/or 2?

The Panel concluded that the facts showed clearly that REALTOR® Sellers did have knowledge that the roof was defective and had not disclosed it to REALTOR® Buyer. Even though a REALTOR® is the owner of a property, when he undertakes to sell that property he accepts the same obligation to properly represent its condition to members of the public, including REALTORS® who are purchasers in their own name as he would have if he were acting as the agent of a seller.

The panel concluded that REALTOR® Sellers was in violation of Articles 1 and 2 of the Code.