Legal Question in Real Estate Law in California
Is a real estate broker required to inform a client if they hold a second trust deed on the clients property?
This property is in probate and had been unlawfully siezed by a family member who took out a 2nd TD. The loan needed to be paid off so the attorney who handled the despute in court arranged for funds to pay off the mortgage company thru a private party. When a real estate agent was needed, the attorney contacted a broker that he knew, who took the listing from the executor. The executor was never informed that the broker was the source of the private funds used to pay off the second and was holding an interest in the property. Is this not a conflict of interest and a fact that should have been divulged?
2 Answers from Attorneys
Ordinarily, yes; a broker must disclose any known facts that do, or might, reveal a position or interest adverse to a client and the client's interests. Certainly when the broker is a stakeholder (other than expecting a commission), his objectivity is compromised and he's more likely to push for a deal that pays him off but leaves client money on the table. A more complete set of facts might show mitigating or explanatory factors, but on the face of things, looks like there's been a breach of disclosure duty.
I disagree with Mr. Whipple, and the thing sounds like a bunch of BS to me, unless there is more to this story than you are telling.
How could the client not know that a real estate broker (who was most likely what would be termed a mortgage broker) held the beneficial interest in a deed of trust? The client has to sign the deed of trust, which would have that information on the form. I'd have to review the whole thing.
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