PSI New Jersey Real Estate State Practice Exam

What legal obligation does a seller have when a property is listed with a real estate broker?

1. Provide a home warranty

2. Disclose known defects

3. Allow potential buyers to negotiate

4. Sell at a predetermined price

The correct answer is: Disclose known defects

When a property is listed with a real estate broker, the seller has a legal obligation to disclose known defects. This is crucial in real estate transactions, as it protects buyers from unexpected issues that could affect the property’s value or livability. Sellers are required to share any material facts about the property that they are aware of, such as structural problems, plumbing issues, or pest infestations. Failure to disclose these defects can lead to legal consequences, including lawsuits for misrepresentation. This obligation is underpinned by various laws and regulations that aim to promote transparency in real estate transactions, ensuring that buyers can make informed decisions. The other options, while they may be relevant in different contexts, do not encapsulate the primary legal obligation of a seller in relation to defects when working with a broker. Providing a home warranty is generally a value-added service but not a legal requirement. Similarly, while sellers typically engage in negotiations with potential buyers, there is no legal obligation to allow negotiations beyond what is customary in the market. Finally, selling at a predetermined price is not required; pricing strategies can vary widely depending on market conditions and negotiation outcomes.