So you are working with a buyer and are in a market where 60% of the listed properties are REO’s and 35% are Short Sales. Realizing the likelihood of a short sale closing, you and your client try to find the elusive, “normal sale” but end up looking at REO’s too. You find an ok looking REO. The MLS comments clearly state there will be no seller disclosures provided.
What do you do to represent your client when they say they want to write an offer on such a property? Comply with the instructions from the seller/listing agent and write no disclosures will be provided by the seller? It is unfortunate that most of the time the answer I find is yes. So, after all these years we have finally come full circle and it is now once again Caveat Emptor?
If this is the case, why? Is it because, “Our offer will be rejected if we don’t comply.”? Or, “We will be getting a home inspection so that will cover us. ”
Let me state that this post is directed at Arizona Agents and other states may have a whole separate set of rules and regulations you are governed by.
In my 20 plus year career in real estate, I have discovered that the very best way to protect myself as a real estate agent involved in a real estate transaction is to protect my client. If my client does not want that protection then they will make that decision against my recommendation and will have no one to blame but themselves. Be aware that this kind of thinking may cost you some business because some buyers want to, “Just buy a home.” In other words, they want to buy a house so badly they are willing to bow to the will of the seller and the seller’s agent and forego receiving the mandatory seller disclosure of known material matters that would affect the price a buyer would be willing to pay for a property. Of course, when they close, move in and find all sorts of latent defects requiring costly repairs, who will they be pointing a finger at? We all know the answer to this question and the finger pointing may be well placed.
Michelle Lind is the Arizona Association of REALTORS® (AAR) legal counsel. In an article written a few years back, she appropriately pointed out to the members that, “A buyer should never waive a SPDS without seeing the SPDS form. Even a blank SPDS is valuable to the buyer. The buyer can and should utilize a blank SPDS as a checklist in conducting the desired inspections and investigations. The SPDS can prompt questions that will assist the buyer in evaluating the property.
Clearly, the SPDS is a valuable tool for both buyers and sellers in a real property transaction. Therefore, every buyer should receive a SPDS.” To see the full article go to http://www.aaronline.com/documents/byr_spds.aspx
The article was written at a time when disclosure had recently become the rule and not an option, but some were not aware of the change including agents representing buyers. In a later article, Michelle also pointed out that, “A seller, including a lender-seller, has a legal obligation to disclose all known defects to a buyer, even when selling a property “as is.” Of course, it is unlikely that a lender-seller is aware of all of the property’s defects. Therefore, most lender-sellers will not provide an AAR (Arizona Association of REALTORS®) Seller’s Property Disclosure Statement (SPDS).
If the lender indicates that a SPDS will not be provided, a buyer’s broker should nonetheless advise the buyer to request the SPDS in the offer. The seller can respond with a counter-offer that a SPDS will not be provided. However, before the buyer agrees to waive the SPDS, the buyer’s broker should provide the buyer with a blank copy of the SPDS form, which will enable the buyer to make an informed decision regarding whether to waive the SPDS. In these circumstances, a buyer’s broker would be wise to obtain the buyer’s written acknowledgment of receipt of the blank form. The buyer can and should utilize a blank SPDS as a checklist in conducting the desired inspections and investigations. The SPDS can prompt questions that will assist the buyer in evaluating the property.” To see the full article go to http://aarnews.com/2009/04/reo-transactions
So why aren’t the lenders complying with the law? My take is that agents both listing and selling are not informing their clients of the obligations under the law.
In AZ, listing agents have been given the perfect tool to accomplish notifying the seller of their obligations to disclose. It is the AAR SPDS’s first page. It is called The Seller’s Advisory. This document clearly points out that the seller’s non-disclosure is the same as making a “false statement” also commonly referred to as fraud.
Is it ok to write into the initial offer, “No SPDS will be provided.”? One answer given on numerous occasions is, “Yes. As long as the buyer signs a waiver.” HMM? What is the purpose of this kind of waiver? To cover the agent’s and broker’s assets? How well will this work? According to case law, not very well unless the client has, “all the pertinent information that would allow them to make an, informed decision."
So what is pertinent? For one thing, a copy of a SPDS should be provided so they at least see what information the seller is not providing. This would be a good start but what about “the other pertinent information?” Like, it is the law that sellers provide this. There is a reason the law is in place. Yes, there will be an inspection done but Superman will be busy that day and won’t be there to see the latent defects the seller is aware of but isn’t telling you. What about the fact that there will be no way to tell what kind of condition those things that can’t be seen are in? With this in mind, it would be a good idea to assume the worst, that they will likely not be working and will need to be repaired or replaced and as a prudent buyer you should figure that cost of time, money and inconvenience into the price you are willing to offer on the property?
I was flabbergasted in a class recently when I finished laying all this out and an agent said, “But if we explain all that, the buyer may not purchase the property and I won’t get a commission.”
Gee, I wonder why some real estate agents don’t have a very good reputation?
Again I say, if it is only about the money, Heaven help us.
Hercel Spears
www.HERCEL.com
Advanced Realty Education
RE/MAX Alliance Group, LLC
Gilbert, AZ
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