Should a Real Estate Agent Disclose Divorce in a Home Sale?

divorced couple sitting on couch holding broken heart images

It’s not uncommon for a couple getting divorced to sell their home, so it’s quite possible that you have been or will be involved in real estate sales  when the sellers are divorcing. In those cases, do you need to disclose that the sellers are getting divorced?

Recently CRES Risk Management fielded a call from a client who wondered just that. The client represented husband and wife sellers who were currently undergoing a divorce. The divorce caused a need to extend the escrow period. Our client felt compelled to disclose a reason for extending escrow beyond simply citing a family emergency.

The CRES risk management team’s response was that because the divorce had no bearing on the value of the home, disclosure of divorce was not necessary. In addition, disclosing the divorce could be a breach of fiduciary responsibility to the sellers, because it would suggest to any buyer that the sellers might accept a lower price.

If the sellers would accept a lower price, doesn’t that affect the value of the home? No, it may affect the sellers’ motivation to sell but not the material value of the home itself.  Further,  the sellers’ agent is bound by fiduciary responsibility. Personal information about the seller that does not relate to the material value of the home must be kept private.

As a real estate agent, you know you have a duty to disclose. In fact, you may have advised clients that if they wonder if they should disclose something, they probably should. If it’s  something about their home, that’s  true. But your clients do not have to disclose personal reasons for selling or other personal information. And you don’t have to disclose personal information that doesn’t  affect the material value of the house either.

Failure to disclose can lead to a lawsuit, but some cases like this one get a little tricky. If you are a CRES Real Estate E&O + ClaimPrevent® client, you can contact our real estate legal advice team if you’re ever unsure whether you need to disclose something. At CRES, we want  to help you with potential claim issues and risks before they become lawsuits.

What situations have you faced that made you question whether you need to disclose?  

This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.

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