California Court Establishes new Listing Agents Duties To BUYERS in a Short Sale
The Court determined that real estate agents have an affirmative duty to disclose matters that pertain not only to physical defects but any matters that otherwise affect the desirability of a buyer to purchase property, including the duty to disclose an impediment to the ability of the seller to convey free and clear title to a buyer. And, the court observed that the duty to disclose the financial impediments was to occur before the buyer executed the purchase agreement.
This ruling is very likely to be adopted by courts in other States.
The California Appellate Court said the decision Holmes et al vs. Sieglinde Summer, Case G041906 (please allow a few seconds for this to load, it's a big file) represents a progression within the court system to define and expand the responsibilities of a real estate agent handling short sale transactions. There are any number of financial factors that can lead to an increased likelihood of an inability to successfully close a short sale transaction. These factors include: private mortgage insurance, deficiency exposure, unpaid HOA liens, sellers inability to make cash contributions and /or sellers relative financial health. The listing agents knowledge or awareness of these financial factors may arguably be considered as information that is relative to the buyers decision as whether to enter into a purchase agreement, and hence, within the scope of the financial information for which a listing agent is affirmatively required to disclose.
This reaffirms that, in short sale, special care must be taken to ensure appropriate disclosures on all sides.
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