Understanding a Real Estate Agent’s Fiduciary Duties – Duty to Investigate

Today, we continue our series on real estate professionals’ fiduciary duties. Attorney, Jose Parra, examines the duty an agent or broker has to investigate. This is an often topic in many seminars as agents and brokers wrestle with the obligation to disclose and what investigation is required.

As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing managing shareholder Keith Dunnagan at kbdunnagan@bpelaw.com.

Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation, please contact me to set up a date and time.

Understanding a Real Estate Agent’s Fiduciary Duties –
Duty to Investigate
By: Jose Parra Esq.

In part three of this series, we looked at the agent’s duty to avoid self-dealing. In today’s portion, we look at the agent’s “duty to investigate.” Brokers and agents are constantly concerned about properly disclosing certain defects related to a residential real estate transaction – whether on the buyer or the seller side. However, the question of what to disclose begins by fully understanding the “duty to investigate.”

California Civil Code Section 2079 governs the duty to investigate for a listing broker to any prospective buyer. It provides that “[i]t is the duty of a real estate broker or salesperson … to a prospective buyer of single-family residential real property or a manufactured home … to conduct a reasonably competent and diligent visual inspection of the property offered for sale …” The question becomes what constitutes “a reasonably competent and diligent visual inspection” under California Civil Code Section 2079. California Civil Code Section 2079.3 states that an inspection under Section 2079 “… does not include or involve an inspection of areas that are reasonably and normally inaccessible to this type of an inspection, nor an affirmative inspection of areas off the site of the subject property or public records or permits concerning the title or use of the property…”

Thankfully, Court’s have provided a proper framework to apply when considering the “duty to investigate.” In Peake v. Underwood (2014) 227 Cal.App.4th 428, 442, the court noted that “… a seller’s real estate agent has a statutory duty to disclose only visible defects, i.e., to disclose only what a reasonably competent and diligent visual inspection of the property would reveal.” The court in Peake noted that the alleged defective condition of the subfloors of the property in question was not visible to the seller and would not have been apparent “during a reasonable property inspection.” (Ibid.) As such, the court determined that there was no breach under California Civil Code Section 2079.

The “duty to investigate” also exists between the broker (or agent) and his principal (client). In such circumstances, the “duty to investigate” is much more extensive between brokers and their clients. Compared to the listing broker’s “duty to investigate,” the buyer’s broker should verify the accuracy of information that is material to the principal’s decision to buy certain property, or should advise his or her client (principal) that the information has not been verified. (Salahutdin v. Valley of California 24 Cal.App.4th 555, 562-563.)

In certain contexts, the “duty to investigate” becomes much more difficult to apply. For example, do comments from neighbors about issues with a property trigger this duty for a listing broker? Or, does knowledge that another salesperson has about potential defects in the listing broker’s office trigger this duty also? It is important to recognize that the “duty to investigate” is limited for a listing broker to a prospective buyer, but rather broad between a buyer’s broker and client.

Fiduciary duties are ripe with issues. The attorneys at BPE Law have significant experience in helping real estate professionals navigate these complex rules and obligations. Don’t go it alone. If you are unsure of your rights and obligations, seek competent legal counsel to assist.


The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.