Simple Tips to Avoid Buyers’ Agent Disclosure Headaches
First: Before conducting a home inspection, seek out and obtain fully completed and executed copies of the Real Estate Transfer Disclosure Statement (TDS), the Seller Property Questionnaire (SPQ), and Agent Visual Inspection Disclosure (AVID), from the sellers’ agent. The reason why this is good practice before sending in the home inspectors is that there are times when a single disclosure can literally kill the deal.
For example, a common disclosure that negatively influences many buyers is a death on the premise. While this may have nothing to do with any structural or material defect in the home or property, some buyers will run from the deal no matter what. If there has been a death, Civil Code 1710.2 identifies when this disclosure must be made as well as exceptions to this disclosure.
If there are adverse conditions known to the agent(s) or seller, disclosing these to the buyer up front and before the buyer incurs home inspection costs, can avoid significant time delays, frustration, bad feelings, and further…. and provide an opportunity to negotiate through these if possible.
Second: Once the TDS, SPQ, and AVID have been obtained, personally examine the documents carefully. If warranted, reach out to the sellers’ agent for further information. Next, meet with your prospective buyers and go over these documents. After you have satisfied yourself that the buyers understand what has been disclosed, then order all appropriate home inspections. Since many commissions pale in comparison to the legal fees and costs associated with even a small professional negligence lawsuit, it is far better to encourage in writing inspections even at the risk of educating your buyers right out of the deal. Common inspections that are good to obtain are a Residential Home Inspection, Pest Inspection, and Roof Inspection. If the property has a swimming pool, encourage your client to have a pool company conduct an inspection. The same goes for wells and septic systems.
While often not thought of as a disclosure, obtaining a Preliminary Title Report is critical to discover early if there are any title defects or other issues such as easements, liens, etc. that could interfere with the sale. If you are not sure what a document is, the title company will provide a copy. Be sure to go over these with the buyer and, if you do not understand them, get legal advice. The same goes for any CC&R’s, HOA Rules, and similar documents that typically exist in subdivision property.
Third: Just like the listing agent, the buyers’ agent must conduct a reasonably competent and diligent visual inspection of the property and note all facts materially affecting the value or desirability of the property. The findings are disclosed both on page 3 of the TDS as well as the AVIDs provided by each agent. Since many of the most expensive and damaging types of disclosure cases that arise involve water intrusion or un-Permitted improvements, when examining the property look for water damage under kitchen and bathroom sinks. Observe the ceiling to make sure they are free from stains or have fresh paint. Also pay attention to rooms that you enter through a sliding door because this could be evidence of an addition that is not technically habitable space.
The California Civil Code does not require agents to pull building Permits, but if you encounter improvements that you suspect were not Permitted, encourage your buyers in writing to pull those Permits. Improvements to a property which are done without necessary building Permits can cause several problems:
(1) un-Permitted work may not have been done in compliance with proper building Codes. This can create a serious health and safety problem;
(2) un-Permitted work may trigger a County Building Department intervention and subject the buyer to double Permit fees and an occupancy violation or even require the buyer to remove the improvement;
(3) even if there has not been any Building Dept. action, buyers now have knowledge of the un-Permitted work and must disclose this when they subsequently sell the property. To fix this situation, buyers often contact the County to obtain a “non-Permit Inspection”. We always recommend that before taking this step, buyers should get a full structural inspection by a licensed contractor or engineer so that they know the scope of any Code violations ad the cost of repair before inviting in the County inspectors; and
(4) un-Permitted improvements, particularly any additions to the structure, may have an impact on the legal square footage negatively impacting a property’s resale value.
By taking these basic steps a buyers’ agent can illuminate matters that can cost large amounts of money if discovered after close of escrow and thus reduce the chance of costly lawsuits later.
We hope that you will find this Article helpful in your business. Please feel free to forward this Article on to anyone that you think may benefit from this information. As always, if you have any questions about your real estate or any legal matter, please call us at (916) 966-2260 or email me, Robert Enos, at email@example.com.
This article is not intended to be legal advice, and should not be taken as legal advice. Every case requires review of specific facts and history, and a formal agreement for service.