Regardless on one's agency
relationship to a buyer, Regulator's appear consistent in requiring a licensee
to demonstrate reasonable care in the discovery and disclosure of latent defects
together with disclosure of known defects. The same requirement is also found in
the REALTOR®® Code of Ethics. In response, either voluntarily or by legislation,
a Seller's Property Disclosure is being used across the
Country.
This Article is aimed at identifying
disciplines that will help an agent demonstrate due diligence beyond the
reasonable expectations of both the customer/client, the Regulator and the Code
of Ethics.
Most property disclosure forms are
filled out at the time of listing or when the seller decides to sell. Then, when
an offer comes in, that disclosure is given to the buyer for review. The first
thing wrong here is the timing. That disclosure could be aged and working within
disclosure requirements anything over two weeks could be
old.
The first suggestion is to have the
disclosure statement updated commensurate to the date of acceptance of the
offer. In the ten plus years that disclosure forms have been around, I have
never heard of a seller calling their agent so the disclosure could be amended
when a storm has come through and tore off some shingles from the
roof.
This update could be as simple as
having the seller initial and dating of the seller disclosure. The second thing
is to use the seller disclosure as a job description for the home inspector,
converting the unknown to a known and verifying the accuracy of the information
within the property disclosure statement. This work effort tends to limit the
scope of the inspection to material facts, making the inspection very credible.
This also is fair to the seller and to a degree, protective of the listing
agent. In addition, this distracts inspectors from making arbitrarily
inspections of cosmetic items that could or should be addressed elsewhere in the
offer.
To a buyer's agent, I am
recommending that language be inserted into an offer that would obligate the
seller to attach any previous inspection report to the property disclosure
statement. This conduct has two profound benefits, 1.) It demonstrates due
diligence; and 2.) Meets minimum requirement in a contract, that being "good
faith".
Now for the issue of payment for the
inspection. Whenever practical, I cause the seller to pay for the inspection(s)
and have the buyer reimburse that payment at closing. Part of the logic is that
if there is a discovery that the buyer can not accept, the inspection fee is
unrecoverable. This discipline will protect the buyer and help the
seller.
Another issue deals with the concept
of earnest money. Some of us will remember the early 80's when sellers were
coming to closing with a check as they had little or no equity in the property.
In many cases they seller could not close. Today, with the increased expenses of
appraisals, inspections and financing the buyer is deserving of some protection
when it is the seller who can not perform. Why is this so a big issue? Watch
some of the TV commercials that have sports stars encouraging people to borrow
up to 130% of value to consolidate debt. I assure some sellers have done just
that and are no longer solvent at closing.
In closing, I want to remind you
that I am not an attorney, nor am I your broker. Please bring this issue up with
your broker/manager. If there is a disagreement with anything I have said here,
they are right and I am wrong.
