Final answer:
An agent must disclose material facts about the property to a potential buyer. Sellers' motives and the lowest price are typically confidential. Material fact disclosure addresses the issue of imperfect information affecting property valuation.
Step-by-step explanation:
An agent must disclose material facts about the property to a prospective buyer. Material facts are aspects of the property that can affect the property's value or desirability, such as structural problems or a leaky roof. Sellers' motives for selling or the lowest price the seller will accept are typically considered confidential unless the seller specifically instructs the agent to disclose such information. The disclosure of material facts is crucial in real estate transactions because it relates to imperfect information, which can affect the buyer's decision-making process and the agreed-upon price for the property.
When facing imperfect information, sellers may disclose problems with the goods, but they have an incentive to minimize what they disclose as it could lower the selling price. To reassure a buyer, sellers might offer warranties, allow inspections, provide verified maintenance records, or offer a return policy.