What should a licensee do if they discover a material defect in a property?

Disclosing a material defect to potential buyers is crucial for maintaining transparency and ethical standards in real estate transactions. When a licensee becomes aware of a material defect, which is a significant issue that could affect a buyer's decision, they have a legal and ethical obligation to inform potential buyers. This ensures that all parties have accurate information and can make informed decisions about the property.

Failure to disclose such defects can lead to serious consequences for the licensee, including legal liability and loss of their real estate license. Buyers have the right to know the condition of the property they are considering, and disclosing known issues fosters trust and integrity in the real estate profession.

In contrast, ignoring or concealing a defect can lead to significant complications down the line, including lawsuits or claims for damages. Reporting it to the state may not be necessary in every situation, unless the defect violates specific laws or regulations that necessitate such a report. However, the primary responsibility lies in disclosing the information to the potential buyers directly to uphold ethical standards and comply with legal obligations.