A client hires a broker to buy a parcel of land for a specified sum, but the broker buys it for himself at a lower price without revealing his costs. This is an example of:

This scenario illustrates the concept of a secret profit, which occurs when a broker or agent secretly benefits from a transaction without disclosing that they have obtained the asset at a lower price. In this case, the broker was hired to act on behalf of the client and was expected to act in the client’s best interests. Instead, by purchasing the land for himself at a lower price and not revealing this to the client, the broker is effectively profiting from the transaction in a manner that is not disclosed, thereby violating ethical obligations and principles of transparency.

This situation underlines the importance of fiduciary duty in real estate transactions, where the broker must disclose any information that could impact the client’s decision-making. By failing to reveal his costs and benefitting personally from the deal, the broker is engaging in unethical behavior that undermines trust in the agency relationship.

Understanding this concept is crucial as it highlights the responsibilities brokers have toward their clients and the legal implications of failing to disclose potential conflicts of interest.