Accurate Disclosures Protect Broker AND CLIENT's Interests

By
Real Estate Broker/Owner with Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker AZ BR 528507000
http://activerain.com/droplet/4YND

There's been a great discussion going on elsewhere on this site about when and whether disclosures are in order, and what may be concealed during a real estate transaction.

Most brokers in most states agree that disclosure of ALL issues material to the consideration to be paid in a real estate transaction are required (your state's mileage may vary--I am specifically referring to MY great state of Arizona).

A question was posed whether it was required to disclose that decades ago, a fire necessitated a complete remodel of a home, prior to the seller's ownership of the property.

Well, how did the seller know about it? Through disclosures from the previous seller, most likely. Maybe the neighbors as well.

It was also stated by an observer that brokers were too worried about protecting THEIR interests, and tended to over-disclose.

Not exactly.

 

Copyright : macgyverhh via www.123rf.com

 


Accurate disclosures protect broker AND CLIENT's interests.

 

When there's a lawsuit, EVERYONE gets turned upside down to see who has the deepest pockets. That's usually the broker . . . but not always! And at the end, everyone's bloodied and bruised except the attorneys. Who needs that time, money, soul and reputation-sucking experience?

But but but . . . what about disclaimers? Okay, in a perfect world, you disclaim and advise outside investigations, sure, absolutely. HOWEVER . . .

Disclaimers do not always protect the broker, or the seller.  In event of outright misrepresentation or concealment of a material fact**, they won't protect the seller--and E/O won't cover the broker.

In AZ, brokers are advised as part of risk-management education that if the seller won't disclose everything material and adverse that they are aware of, to drop that seller and if necessary, advise a prospective buyer why.  If it's material and adverse, and not expressly protected by law  . . . it's NOT confidential!

We have frequent occasion to re-sell properties where the seller was originally our buyer, and we have the prior seller's disclosures on file . . . if so, we add pages to the current seller's disclosure to include information provided by the previous during that seller's purchase. Our seller is disclosing what he knows, what he was told by previous seller, how he investigated and what was discovered at that time.

If you were buying a 50 year old property and you could have access to information from the previous seller's disclosures going back 20 years, would you want them? I would. It's something that can't always be discovered in public records.

An informed transaction is a solid transaction that won't fall out or be subject to renegotiation when the buyer finds out from Ol' Granny Gabby down the street during inspections that the house burned to the frame in 1990 and the remediation company's contractor license was revoked in 1992 for numerous complaints about using bad materials or shoddy workmanship. What was 'code' then as opposed to now?  Would having to update to today's standards be material to a buyer today? Sure. 

The buyer can then figure out if the deal makes sense at that price.

 

**What IS material, anyway?

The real question is: what is material TO THAT BUYER AT THAT TIME?

I don't want tweakers, busybodies or folks who hate music next door. That's material to me.

Because I am going to be singing over here.

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accurate disclosures protect broker and clients interests
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Rainmaker
141,780
Diana White-Pettis
Exit Bennett Realty - Upper Marlboro, MD
GRI, CDPE, CNE, WHC Upper Marlboro Homes for Sale

Candice,

This is a very informative and great post. It makes lots of sense that if the seller won't disclose everything material and adverse that they know, to drop that seller and if necessary, advise a prospective buyer why. Thanks for sharing. 

 

Jan 14, 2017 08:48 AM #1
Rainmaker
1,105,193
Bob "RealMan" Timm
Alliance Real Estate - Minot - Minot, ND
Bob Timm, Broker Associate, Alliance Real Estate

I agree completely Candice A. Donofrio . Some of the banter I've read lately was about disclosing deaths and hauntings. Those two items are not required in ND and I don't mention them if I'm not asked.

Jan 14, 2017 08:49 AM #2
Rainmaker
528,127
Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

Thank you Diana White-Pettis . I have a trigger finger when it comes to concealing sellers. Not worth it! Plus, some of the properties I work on (commercial land especially) if there are environmental issues, liability is joint and several and all can be 'dinged'.
Bob "RealMan" Timm in AZ a death, suicide, murder, felony, sex offender in vicinity or occupant suffering from HIV/AIDS is NOT disclosable and must be kept confidential by the seller's or a dual agent. We still advise the buyer to investigate thoroughly on their own and direct them to resources if it's material to them. Things get too messy when a buyer is remorseful and I'd rather have the deal die now than be killed later.

Jan 14, 2017 08:54 AM #3
Ambassador
302,890
Linda K. Mayer
License # 01767321 - La Verne, CA
Realtor, SRES, SoCAL, A REALTOR YOU CAN TRUST

Candice, we have her... Nosey Neighbor Lady!  That's how we found out our house used to be a grow house complete with huge DEA bust!  Those people are invaluable if the sellers don't disclose!

Jan 14, 2017 08:56 AM #4
Rainmaker
528,127
Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

Linda K. Mayer hahah! I knew you'd know the answer to all this! And if it's a cook house . . . holymoly! It's better to hear from the sellers first . . . buyers then begin to wonder what else is being held back.

Jan 14, 2017 08:59 AM #5
Rainmaker
956,146
Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.

I would be curious to see what % of agents actually would drop a seller for lack of disclosure. Any guesses?

Jan 14, 2017 11:02 AM #6
Rainmaker
528,127
Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

Susan Haughton I would love to see that number as well, but suspect that it would be about as accurate as election polls! LOLLLL

Jan 14, 2017 11:14 AM #7
Rainmaker
956,146
Susan Haughton
Long and Foster REALTORS (703) 470-4545 - Alexandria, VA
Susan & Mindy Team...Honesty. Integrity. Results.

Hahaha, you are undoubtedly right about that!

Jan 14, 2017 11:21 AM #8
Ambassador
2,871,065
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Northern VA

Our state is about the polar opposite of yours.  We have disclaimers, called disclosures and what a seller has to disclose is next to nothing.  Listing brokers could be putting themselves at risk of violating their fiduciary duty to their seller by disclosing things that didn't need to be disclosed if it harmed the seller.

On the other hand, representing a buyer, I let them know that what sellers don't have to disclose amounts to  diddley squat.  Want to know what's up in the neighbrhood?  Time to door knock.  The sellers aren't going to tell us and the listing agent isn't doing their client a fiduciary duty if they do.  Neighbors will sing like canaries.

It's all relative to who you represent, what your state laws are, and making sure you represent the best interests of your clients.  In Virginia, those interests when it comes to disclosure, could not be more different.  Just one reason I avoid dual agency. 

Jan 14, 2017 01:43 PM #9
Rainmaker
528,127
Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

Chris Ann Cleland Neighbors will sing like canaries indeedie!

Jan 14, 2017 04:52 PM #10
Rainmaker
685,682
Hella Mitschke Rothwell
(831) 626-4000 - Honolulu, HI
Hawaii & California Real Estate Broker

Candice A. Donofrio - It's amazing how symantics as to "material facts" can leave some very important things out. All RE forms now make sure that we, the agents, also state things that WE see. Showed a condo the other day and the buyer smelled "something" in one of the bedrooms. I went in and smelled "sewage". The LA said, "oh, the washer overflowed" and she guessed that the rug hadn't dried all the way. Really? The washer is in a totally different part of the condo and it smells next to the bathroom way over here? I would recommend that (1) the buyer get some "disclosure" on the fix plus (2) pull that new rug UP see what's under there.

Jan 18, 2017 02:03 PM #11
Ambassador
2,344,629
Debe Maxwell, CRS
www.AtHomesCharlotte.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Hi Candice!  It always seems to be the neighbors that wind up spilling the bean. Do the sellers and the agent not think that the buyers will ever meet the neighbors?!

Apr 10, 2017 08:13 PM #12
Rainmaker
1,269,312
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Los Angeles CA

I fill up my AVID as much as possible and try to mention all possible issues during transaction in my email communication, the more records and disclosures of what I'm aware of, the better. 

Apr 12, 2017 06:48 PM #13
Ambassador
2,344,629
Debe Maxwell, CRS
www.AtHomesCharlotte.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

Ol' Granny Gabber neighbor seems to be living in North Carolina too - at least her sister is, Candice!  

As for disclaiming items that are not on the State's Disclosure, they're not required here but, I totally agree with you - I'd rather have a deal die before it's a deal than after the neighbor spills the beans to the new buyer and kills the deal down the road.

May 06, 2017 11:28 AM #14
Rainmaker
461,880
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

One of the problems I have with our state seller disclosure is that several questions start out with "Has there ever been..."

Well, how is the seller supposed to know if there was "ever" a certain problem prior to their ownership.

Dec 03, 2017 06:42 PM #15
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Rainmaker
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Candice A. Donofrio

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