Like the duty of confidentiality, the duty of diligence can be confusing. Diligence means the attention and care legally expected or required of a person. What is legally expected of a real estate licensee is that they have the attention and skill of the average real estate licensee. This self-referential standard feels mushy, and in many ways it is, but that is no accident. Measuring diligence by reference to peers creates a dynamic standard of care in an industry.
As circumstances in the industry change, so does the standard of care. Until well into the 1980’s no one thought anything of a buried heating oil tank. Today, an agent, whether representing a seller or a buyer, would hardly be considered diligent if they ignored the existence of such a tank. The same is true of man-made siding, mold and any number of other issues. Diligence doesn’t require a person to be a good real estate agent but it does require that they not be a bad one.
The duty of diligence is arguably the most important of the common law duties. A lack of due diligence is another way of saying “negligent.” Negligence is important because an agent can be negligent both in what they do and what they don’t do. Failing to understand a transaction document can be negligent. Failing to read that same document can be negligent and, depending on the circumstances, it may even be negligent not to know there ought to be such a document. It is this last, or negligence by omission, aspect of the duty of diligence that makes it so dangerous.
Negligence by omission is easily confused with misrepresentation by omission. Indeed, the two legal theories overlap because each is based on the idea of not knowing what one should know. This overlap has caused the industry to focus on disclosure as a means to control risk. Unfortunately, disclosures do not help when the claim is a lack of diligence rather than misrepresentation.
Diligence requires the application of training and intelligence to specific circumstances. It is for this reason that general disclosures of potential problems are ineffective when the claim is lack of diligence. Take, for example, the problem of mold. Disclosing that mold can be a serious problem in housing does not excuse the agent who misses or ignores “red flags” like odors or stains that indicate there may be mold in a particular property. In fact, quite the opposite is true.
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