What is the Impact on Seller When The Listing Agent Fails to Disclose?
Listing agents have a duty to disclose, in writing, all deficiencies known about the property they list for sale. An agent's failure to disclose may end up costing the seller.
There seems to be a lot of this (non-disclosure) going on in my Silicon Valley real estate market. Last month a listing agent failed to disclose $3,700.00 in foundation repairs. That agent ended up paying my buyer clients for the repairs. A costly mistake, indeed.
I recently wrote an offer on a condominium located in Sunnyvale, California. We we instructed to sign and return the Receipt for Documents with our offer. This is not an issue because as the agent for the buyer I want to review all of the seller disclosures, reports, inspections, etc. prior to writing an offer.
The Receipt for Documents did not list a furnace inspection. There was however, a one page illegible, hand written furnace inspection report included with the disclosures. From what I could read, the inspector noted $300 to replace something, I could not read what, and $400 to replace the ignition system.
My client's offer was submitted based upon what we knew about the property. The offer price reflected the same. The offer was approximately $15,000 over asking price. That's the market we are in. If a buyer wants to win in multiple offer situations, the buyer must be prepared to ante up.
Our offer was accepted. The listing agent called the evening the offers were presented and advised me verbally the seller accepted the offer. She further advised that we will receive the signed paperwork in the morning. The listing agents parting words were:
"By the way, I am wondering if you know the furnace does not work. It was shut down by the inspector for safety reasons. The furnace needs to be replaced. I told everyone that went through the open house about it. I don't know if you and your client came through the open house."
Well, no, actually we did not know about the furnace. There is no mention of it on the one page furnace inspection nor any mention of it on your agent visual inspection disclosure.
Of course, there was no mention in the seller disclosures either because the property is being sold by a successor trustee, who is exempt from completing the Seller Transfer Disclosure Statement.
But, and that is a rather big BUT, the listing agent, who also managed the property for her now deceased client, is not exempt from disclosing what she knows about the property. Telling people at an open house, and not including the facts in the seller disclosure package, falls extremely short of full disclosure and meeting her fiduciary duty to her client.
Will I be requesting a $2,500 seller credit, the cost to replace the old, broken furnace that does not work? You bet I will.
Sellers Beware: If the agent your hire to represent you makes mistakes like this, it may end up costing you money you had not planned on spending. Even worse, you may end up in costly mediation or arbitration to settle the dispute with the buyer who acted in good faith, trusted and relied upon the information provided by the agent, and made their offer based upon false and/or misleading information.
A hot seller's market does not excuse anyone from full disclosure. Someone needs to pay to replace the furnace. I do not believe it should not be the buyer, or the buyer's agent.
What are your thoughts regarding this situation?
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