Completing the Agent Visual Inspection Disclosure: Part 8 Understanding CAR Forms
Today, in part 8 of our Understanding the CAR Form Series we review the obligations of the agent in completing the AVID. This is always a hot topic with questions attempting to identify what does and does not need to be disclosed. The simple answer is when in doubt — Disclose.
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Completing the Agent Visual Inspection Disclosure:
Part 8 Understanding CAR Forms
By: D. Keith B. Dunnagan, Esq.
Thus far in this series on the CAR Forms we have completed our review of the Residential Purchase Agreement (“RPA) by examining contingencies and how they work, then reviewing liquidated damages and cancelling a contract, followed by collecting the earnest deposit and specific performance when parties breach and finally reviewing the contractual language related to closing an escrow. This is the process of navigating the RPA from a high level.
In Part 6 we began our look at disclosures and more importantly the TDS as required by the Civil Code § 1102 et seq and in Part 7 we examined teh requirements of the seller in the SPQ. Today, examine the requirements of the Agent or Broker in completing the Agent Visual Inspection Disclosure (“AVID”). There is a constant risk management debate and routinely agent’s are trying to reduce liability exposure in the way the agent provides disclosures. It is a rare week that goes by where we don’t get a question about the agent’s duty to disclose certain items and we routinely defend agent’s when they are accused of failing in their disclosure obligations. One of the more common scenarios that we are questioned with is “I have this listing and the seller has told me about some issues – but the seller told me that I am not allowed to disclose the information to the buyer. What should I do?”
The duty of an agent to disclose is rooted in contract, statutory law and common law. In contract law it takes the form of the disclosures contained on the Agent’s Visual Inspection Disclosure. Pursuant to Section 10(A)(2) of the RPA the Seller’s disclosures are not completed until the Seller has completed all the questions and signed and Listing Agent “has completed and signed the Listing Broker section(s), or, if applicable an Agent Visual Inspection Disclosure (“AVID”).” The contract provides that the Listing Agent has to complete disclosures.
But the section goes and states “nothing relieves a Buyer’s Broker, if any, from the obligation to (i) conduct a reasonably competent and diligent visual inspection of the accessible areas of the Property and disclose” on the TDS or AVID material facts affecting the value or desirability of the Property. Contractually both parties have an obligation to provide disclosures and it is an obligation that cannot be avoided.
The language contained in the RPA nearly matches the language found in Civil Code Section 2079 which statutorily requires that a real estate broker or salesperson owes a duty to a prospective purchaser of a residential property to conduct a diligent inspection. Where the contract segregates the obligations between the listing agent and buyer’s agent, the statute makes no such distinguishing statement. The court decisions interpreting this code have confirmed that the duty of disclosure is required of both the listing broker (See Robinson v. Grossman, 57 Cal. App. 4th 634) and buyer’s broker (See Michel v. Moore & Associates, Inc., 156 Cal. App. 4th 756 – stating the trial court erred in dismissing the claims against the buyer’s agent).
In the recent and well-known 2016 case Horiike v. Coldwell Banker, 201 Cal. Rptr. 3d 1, the Court reaffirmed the longstanding rule that the broker owes the duty to disclose all information materially affecting the value or desirability of the property.
There is a difference however, between investigation and visual inspection. The law confers on the agent the obligation to disclose problems that can be seen or discovered in a visual inspection. See Pagano v. Krohn, 60 Cal. App. 4th 1. These cases and the contracts do not however require the licensee to take the place of professional inspectors and conduct exhaustive investigations of the property.
The requirement of the Agent is to complete a diligent visual inspection. This means disclosing what is readily visible and only that which is visible. Which we often teach to do this effectively requires the use of the 4 word principle, ie. Crack in the driveway or spot on the wall. Identify the defect, do not speculate on the cause, such as crack in the driveway caused by roots from neighbor’s trees. As the agent you don’t know the cause and to speculate on cause exposes the agent to liability if the cause is ultimately proven to be inaccurate.
Be sure to take the time to complete the AVID accurately. Take contemporaneous notes of your inspection and the date and time when the inspection occurred and complete the AVID promptly after the inspection. Or better yet, take the AVID with you and complete it as you compete your visual inspection. Contemporaneous statements are always preferred. Do not skirt the obligation to complete the AVID by simply advising that a professional home inspection is completed. Such a statement does not comply with the requirements to complete an AVID and will certainly expose the agent to liability. Remember, the agent cannot abdicate their responsibility to complete this inspection to another.
In the next installment of this series we will look at additional required disclosures and notices including the NHD. If you or someone you know is having an issue related to incorrect disclosure they need to seek the advice of competent counsel. The law related to non-disclosure is complicated and tricky to navigate and the attorneys at BPE Law Group have significant experience in advising and representing clients in these matters and would welcome the opportunity to assist you in your disclosure matter.
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in business and real estate matters and have represented clients in hundreds of matters involving home purchases and disclosures. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at email@example.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.