How do I balance by duty to disclose against by duty of confidentiality?

QUESTION: I have a listing, and the buyers had a home inspection performed. They decided to terminate the contract based on the findings of the inspection. The buyer’s agent shared the inspection report with me after the buyer terminated. The report revealed structural, plumbing, and electrical issues that were not apparent before I created the listing. I shared the report with the seller and told him that there are some issues that should be disclosed before making the property active again. My seller stated that he has no intention of reviewing the inspection report, and he instructed me not to speak about the report or its findings with anyone. He also threatened to terminate our listing agreement and hire someone else in order to avoid disclosing the report or any of its findings to prospective buyers. I know that I have a duty to disclose material facts, but I also know that I owe my client a duty of confidentiality. Should I disclose the material facts in the inspection report to prospective buyers even though my client told me not to?

ANSWER: Yes. In a situation like this, we believe that an agent’s duty to disclose material facts supersedes their duty of confidentiality that is owed to their client. If your seller terminates the listing agreement solely because you must disclose material facts, then this is not a valid reason to terminate agency, and you may be entitled to a commission.

Agents have a duty to discover and disclose material facts to all parties in a transaction. See N.C.G.S. § 93A-6(a)(1) and Rule 58A .0114(c). All brokers, whether representing a buyer or seller, have an affirmative duty to discover and disclose material facts. In other words, an agent cannot simply claim ignorance or rely on their client’s representations about the existence or non-existence of a material fact. We have previously written here and here that agents must review inspection reports within their possession and disclose any material facts that may be included in those reports to all parties in a transaction.

Agents owe a duty of confidentiality to their clients. We have written here that Article 1 of the Code, specifically Standard of Practice 1-9, expressly provides that a REALTOR is obligated to preserve confidential information provided by their clients in the course of any agency relationship, and that obligation continues even after the agency relationship terminates. As evidenced by the situation you are currently dealing with, there are times when this ethical obligation clearly conflicts with an agent’s disclosure obligation under the laws referenced above. When the Code is in conflict with governing law, the Preamble to the Code provides that “the obligation of the law must take precedence” over any ethical responsibility imposed by the Code.

Considering the weight of your disclosure obligation against your duty of confidentiality, you should inform your seller that, if he wants you to re-activate the property, the law requires you to disclose the material facts contained in the inspection report, despite his demands that you refrain from doing so.

Keep in mind that if the seller chooses to terminate your listing agreement and hire another firm to represent him, then your disclosure obligation also terminates. In other words, once your agency relationship ends, you no longer have an obligation to disclose material facts to parties represented by other agents who may later become involved in the sale of the property. If you proactively volunteer any such information to any such parties, the seller may consider this to be wrongful interference with their efforts to sell their property.

Finally, an agent only has a duty to follow lawful orders of their client. A seller demanding that you refuse to disclose material facts is not a lawful direction. If a seller terminates a listing agreement on these grounds, your firm may be entitled to a commission based on the seller’s breach of the listing agreement.

Release Date: 6/11/2026

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