This topic came up in my 45 hours of continuing education, and Donna agreed that rarely do listing agents comment on their seller’s disclosures – do they even read them? A focal point as we transition into single agency:
To complete the disclosure process, the seller’s agent filters property information provided by the seller before it is provided to the prospective buyer.
Accordingly, all property information received from the seller is reviewed by the seller’s agent for inaccuracies or untruthful statements known or suspected to exist by the seller’s agent. Corrections or contrary statements by the seller’s agent necessary to set the information straight are entered on the disclosure forms before the information is used to market the property and induce prospective buyers to purchase, collectively referred to as fair and honest dealings.
The extent to which disclosures about the physical condition of the property are to be made is best demonstrated by what the seller’s agent is not obligated to provide. Everything else adversely affecting value and known to the seller’s agent – material facts – are to be brought to the attention of prospective buyers as a matter of law.
As a minimum effort to be made before handing a prospective buyer information received from the seller, the seller’s agent is to:
- review the information received from the seller;
- include comments about the agent’s actual knowledge and observations made during their visual inspection of the property which expose the inaccuracies or omissions in the seller’s statements; and
- identify the source of the information as the seller.
Listing agents aren’t obligated for these, and agents would be quick to assume they are off the hook altogether:
A seller’s agent on a one-to-four unit residential property owes no affirmative duty to a prospective buyer to gather or voluntarily provide any facts unknown to the seller’s agent about:
the property’s title conditions, consisting of encumbrances such as easements, Covenants, Conditions and Restrictions (CC&Rs), legal descriptions, trust deed provisions, etc.;
the operating expenses and any tenant income the buyer will experience during ownership, such as utilities and property taxes;
the zoning or other use restrictions which may affect the buyer’s future use of the property, except for the existence of industrial zoning which affects the property, and nearby military ordnance locations;
the income tax aspects of the buyer’s acquisition of the property, such as limitations on interest deductions;
the suitability of the property to meet the buyer’s objectives in the acquisition; and
information or data on any mixed use of the property, such as acreage included in the purchase for use as subdividable lands, groves or other farming operations, or for use for tenant income or as a vacation rental.
Further, the seller’s agent owes no duty to prospective buyers to:
give advice;
make recommendations;
offer suggestions;
comment on the extent of any adverse facts disclosed;
state an opinion; or
explain the effect on the buyer of any facts about the property’s physical, natural or environmental conditions which have been provided by the seller’s agent.
Likewise, a seller’s agent does not owe a duty to the prospective buyer to explain the consequences of the customer’s failure to further investigate or analyze adverse facts sufficiently disclosed by the agent to put the buyer on notice of the condition.
However, when asked by the prospective buyer or buyer’s agent about any aspect, feature or condition which relates to the property or the transaction in some way, the seller’s agent is duty-bound to respond fully and fairly to the inquiry. The response is to include material facts known to the seller’s agent about the subject matter of the inquiry and not contain misleading statements.
Conversely, it is the buyer or the buyer’s agent who has a duty to care for and protect the buyer’s best interests.
The buyer’s agent, not the seller’s agent, are to determine what due diligence efforts are necessary to learn the extent to which the facts disclosed by the seller’s agent interfere with the buyer’s expectations for the use and enjoyment of the property.
An example: Sellers of houses in west Carlsbad that are in the flight path of Palomar Airport are accustomed to planes flying overhead, and may not remember to include on their seller disclosures.
But it is a material fact, and buyers who aren’t forewarned could have a problem with it.
Here’s another interesting one:
Regardless of whether a death occurred within three years of the buyer submitting a purchase offer, on direct inquiry by the buyer or their agent, the seller’s agent needs to disclose their knowledge of any deaths on the real estate. [CC §1710.2(d)]
Consider a buyer who asks the seller’s agent whether any deaths have ever occurred on the property.
No matter when the death occurred, on direct inquiry, the seller’s agent must disclose their knowledge of the existence of any deaths which occurred on the real estate. [CC §1710.2(d)]
An intentional misrepresentation or concealment of a known fact after a buyer makes a direct inquiry is:
– a breach of the seller’s agent’s general duty owed to the buyer to truthfully respond when the seller’s agent represents the seller exclusively; or
– a breach of the buyer’s agent’s agency duty owed the buyer since the agent is the buyer’s representative in the transaction. [CC §1710.2(d)]
Further, an inquiry by the buyer into deaths indicates a death on the premises is a fact which might affect the buyer’s use and enjoyment of the property. Thus, a death occurring on the property is a material fact.
On an inquiry into deaths by a buyer, an affirmative duty is imposed on the buyer’s agent to either:
1) investigate the death or 2) recommend an investigation by the buyer before an offer is made, unless the offer includes a further-approval contingency on the subject of death.
An agent who discloses, on inquiry, that they do not know whether a death occurred on the real estate, is to hand the buyer a memorandum stating:
a) the buyer has made an inquiry about deaths on the property;
b) the agent has disclosed all their knowledge concerning the inquiry; and
c) whether the agent or others will further investigate any deaths on the property.
Triple check the part about obnoxious odors and more from wildlife. Trust me on this one.