It's Your License - Don't Light A Match Under It

By
Real Estate Agent

Much has been written about the need for disclosure in real estate transactions.  In this instance I'm addressing the need for a seller to disclose property condition. 

Confusion


Some agents inadvertently allow a seller to skirt their responsibility.  I'm not suggesting that agents are culpable or assist non-compliance. 

I am suggesting they don't fully understand the law, or that a sellers disclosure might have to be amended during the listing contract.

In Pa a Sellers Disclosure is required on all residential real estate transactions. 
Pa law exempts certain classifications of individuals from the disclosure responsibility. There are 9 exemptions:

  • Banks (foreclosed properties)
  • Fiduciary - Estates
  • Court Order
  • Co-Owner transfers
  • Transfers made to testate or intestate successions 
  • Transfers made to a spouse, or to a person or persons in the lineal line of consanguinity
  • Transfer to or from a Governmental agency
  • Transfers from an entity that has taken title to residential real property for the purpose of assisting in the relocation of the seller.
  • New Construction


Many times inexperienced agents, or those not conversant with the law allow sellers to cajole them.  It's easy to allow a seller to escape the requirement if you can justify to yourself they HAVE NO KNOWLEDGE.  Not having knowledge is not one of the 9 exemptions.

Situation number one:
Flood
Seller lists property and completes a sellers disclosure.  During the listing the seller notifies the listing agent to suspend showings because his basement flooded. 


Seller repairs condition and installs sump pump.  Listing agent does not have seller Seller amend the original sellers disclosures.


Situation number two:
Septic Tank
Property is listed by an heir who had not lived in the property. No sellers disclosure was completed.  Seller accepts a contract on the property and inspections take place. 

The septic is found to be inoperable by the sewer authority of the township.  Seller and buyer cannot come to terms on the repair and contract is canceled. 

Several months go by and the property is re-listed with the same listing agent.  Septic was covered over, never replaced and no amended disclosure was completed. 


Situation number three:
LandlordAn investor purchased a home in a vacation community during boom times and rented it out.  He has owned it for 10 years. 


He is now marketing the property without a sellers disclosure.  The listing agent says that is perfectly fine because the owner never lived there. 


He may not have lived there, but certainly after 10 years of ownership he knows the last time the furnace was serviced or if the roof was replaced.

  • As a matter of practice we have every seller complete a sellers disclosure.  There is a provision for a seller to refuse and sign that they have refused.  Obviously this is a red flag to a buyers agent. 
  • If the property is an estate have the Executor x out all copies and sign as Executor.  A note on the form that the Executor has no knowledge should be included.


If a question ever arises later, the listing agent has documentation supplied by the seller.  CYAIt's your license and your livelihood.  Don't be drawn into the justification game with the seller. 

  • Should something go awry later the listing agent will surely be part of litigation.  While the listing agent may not be sued, they well may find themselves a star witness.


In situation number one and two the listing agent had knowledge.  Under Pa Law the listing or buyers agent has a duty to disclose.  "§  35.284a(c) and (d)—Seller's agents and buyers agents are required to disclose known defects but are not required to make independent inspection"

  • If you represent a seller and later HAVE KNOWLEDGE of defects you have two choices in my humble opinion.  Require that the seller disclose by amending the sellers disclosure.  If they refuse go to your Broker and make them aware that the seller is attempting to hide a material defect.  Follow up with an email to the Broker confirming the verbal conversation so you have record you did inform your Broker.


In a recent opinion from Doug Marsico, Esq. legal counsel for PAR, Attorney Marsico actually addresses situation number three that of a non-occupant owner.  It's an interesting read.  Sellers Disclosure Opinion  

As an aside, all three of these situations are first hand.  The most recent happened last week.  Listing agents are at risk unless they get firm with the seller.  Consider the possible ramifications before you put yourself in harms way.

close

Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Lenn Harley 03/27/2012 08:19 AM
  2. Joe Jackson 03/27/2012 11:21 AM
Topic:
Home Selling
Location:
Pennsylvania Lackawanna County Clarks Summit
Groups:
Realtors®
RE/MAX Active Rain Bloggers
ActiveRain Rockstars
Bananatude
Bartender, Make it a Double
Tags:
sellers disclosure
amend sellers disclosure
scanton pa sellers property disclosure
clarks summit pa sellers disclosure

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Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Michael S.  You are correct about the risk.  I cannot understand why any agent would want to be involved in something deemed to be illegal.

Mar 27, 2012 11:34 PM #40
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Mike:  Yes I agree.  Since it is rare that the general public is savvy enough to sue these things go undetected.    As the public becomes more educated it will happen more frequently.

Mar 27, 2012 11:36 PM #41
Rainmaker
770,096
Robert Rauf
HomeBridge Financial Services (NJ) - Toms River, NJ

"commiting Real Estate"  I like that!  So often we see brokers that just dont mentor agents... and will say: "why sould I train them,so they can leave and go to another office?"  UMMMM... maybe if you did train them and support them they would stay??? (and everyone would stay out of jail too!)

Mar 28, 2012 12:44 AM #43
Rainmaker
316,251
Sandy Acevedo
951-290-8588 - Chino Hills, CA
RE/MAX Masters, Inland Empire Homes for Sale

Non disclosure is a just a lawsuit waiting to happen, so why do it? I have seen buyers accept many homes in need of repair with disclosure.

Mar 28, 2012 01:25 AM #44
Ambassador
1,155,085
Bryan Robertson
Los Altos, CA

There are minimum disclosures here in CA and for me personally, I won't list a property if the seller won't go the extra mile with a full description of what they know.  As agents, we're required to do our own inspection and report what we observe.  If I see things that cause me concern, I'll ask the seller and make sure it comes out in their disclosures.

Mar 28, 2012 01:50 AM #45
Ambassador
1,241,779
Joni Bailey
101 Main St. Realty - Huntsville, TX
Your Huntsville / Lake Livingston Area REALTOR®

In my opionion, it is better to over disclose than under disclose. When in doubt, disclose. (GO Bryan #46)

Mar 28, 2012 02:17 AM #46
Ambassador
877,470
Connie Harvey
Pilkerton Realtors - Brentwood, TN
Realtor - Nashville TN Real Estate

Bonnie, I so don't understand why agents let this happen. Don't they know that they can get sued too???? Totally inexcusable.

Mar 28, 2012 03:58 AM #47
Rainer
20,450
Linda Moran
The Real Estate Shop - Oak Harbor, WA

Bonnie this is a great post and so true. I can't tell how many times I have to conjole the seller to update their disclosure as things are discovered though inspections etc. I sell real estate in Washington State. In my past life I sold I was a Real Estate Broker in CA...in CA the agent had a special portion of the disclosure to fill out and sign. We were encouraged as agents to walk around the property and find things to disclose.

Not so in WA! Only if we know something the seller will not disclose. There is no disclosure area on the form to fill out. Funny how d states handle sellers disclosure so different from each other.

Mar 28, 2012 04:25 AM #48
Rainmaker
1,246,841
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Bonnie:  Excellent post with excellent examples stated.  Obviously there may be some difference in laws or how disclosures must be handled, depending on the state in which the property is found ... but no matter, there is great need for caution regarding this issue.  The money possibly gained from a sale isn't worth the risk, in my estimation.

Gene

Mar 28, 2012 06:01 AM #49
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Dale:  Disclosure should be required everywhere.  Without it the buyer could by buying a pig in a poke.

Mar 28, 2012 10:17 AM #50
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Robert:  The Broker who does not wish to train, let's agents run amok, risks his/her license as well.  The Broker is responsible for the actions fo the agent.

I have worked for firms who use a mentoring system.  I think that helps new agents immensely.

Mar 28, 2012 10:19 AM #51
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Sandy.  If the buyer really wants the house many times they will accept issues and be prepared financially to deal with them.

Mar 28, 2012 10:20 AM #52
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Bryan:  We are the other hand rely entirely on the seller to disclose.  We are not required to do an inspection.  That would be scary.  Most agents can't figure out if the service is 100 amp or 200 amp.

Mar 28, 2012 10:22 AM #53
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Joni,  I agree it is better to tell as much as possible instead of trying to skirt around major issues.

Mar 28, 2012 10:23 AM #54
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Connie:  Until that big suit comes they live in La La land.  They think errors and omissions will cover them.  Not for fraud it won't.

Mar 28, 2012 10:25 AM #55
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Linda:  In Pa it is entirely on the seller to disclose in writing.  The example I used taken from State law required the agent to disclose but not inspect.  We do not have a portion of the disclosure form to fill out.  Not sure how the law wants us to disclose or to whom?  We get no guidance on that.

Mar 28, 2012 10:27 AM #56
Rainer
111,688
Caprice Couselle Realtor Morristown Homes For Sale
Keller Williams Realty - Morristown, NJ
First Time Home Buyers,Relocation,Horse Farms

Bonnie, Great post. I've been very lucky so far .All my sellers are very honest and really take the time to think out everything before filling in the information. Looking for receipts, so the information disclosed can be as accurate as possible. Not so with the sellers disclosures I have received from other agents.There are so many unknowns checked off it hardly pays to print out all those pages. Caprice

Mar 28, 2012 10:28 AM #57
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Gene thank you.  Disclosure does vary around the country.  I will not list a property I know has a serious problem the seller is unwilling to own up to.  I certainly do not want to be sued nor do I wish to be party to a deception.

Mar 28, 2012 10:29 AM #58
Rainmaker
1,294,660
Jon Kolsky
Kolsky Realty & Management - Long Beach, CA
Licensed California Real Estate Broker

~If you don't know the rules you shouldn't play Great Blog!

Mar 29, 2012 02:25 PM #59
Rainmaker
244,734
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Jon,  Thanks for the comment.  It disturbs me how many agents are letting this slide.

Mar 29, 2012 07:41 PM #60
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