Feature
by Candace T. Lam & Nicole M. Soltanzadeh
A seller’s realtor only has to disclose what she knows. The duties differ depending on the size of the property, but for properties of 1-4 units, generally speaking, a realtor must disclose what the seller tells her and what the realtor sees on the property herself. This means that a realtor does not have to inspect areas offsite, like public records or permits, or even common areas for condominiums or co-ops. However, this does not mean that an agent should purposefully shield herself from informing potential clients of defects or other conditions on the property in order to avoid disclosure. An agent has a duty of honesty and fair dealing and must disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties. If a real-estate agent fails to make her necessary disclosures until after the buyer has already signed the purchase contract, then the buyer can choose to either rescind the purchase contract or recover her actual damages suffered by this realtor’s failure to disclose.
So what should a realtor do to fulfill her obligations and protect herself and her clients from a potential rescission or action for damages? According to Leah Faresh-Karp, a realtor for RE/MAX of Southern Marin, real-estate agents “should take their time when filling out their disclosures and if in doubt, disclose.” In addition, agents should keep the seller’s disclosure obligations in mind when filling out and reviewing the Real-Estate Transfer Disclosure Statement and inspecting the property. For properties of 1-4 units, a seller has an affirmative obligation to disclose any defects in, among other things, appliances, heating, sewer systems, walls, foundation and roofs. Agents should therefore check the seller’s information to ensure the accuracy of the disclosures here.
A seller must also disclose her awareness of any environmental hazards or easements on the property, or if the property is in a natural hazard zone. The mere recording of a notice that the property is within a natural hazard zone obligates the agent to disclose that fact to a buyer. Accordingly, agents should check the offices of the county recorder, county assessor and the county planning agency for postings of natural hazard zones. After completing visual inspections, agents should remember to speak with the seller about the history of the property. If the former occupant of the property died on the property within three years before the sale, that information, too, must be disclosed.
The disclosure obligations differ greatly for properties of 5 or more units. For such properties, a real-estate agent must (1) obtain a public report issued by the Department of Real Estate; (2) disclose, in many instances, the buyer’s right to negotiate with the seller to permit inspections of the property; (3) disclose a buyer’s right to rescind the sales contract, whether the property is subject to a blanket encumbrance; and (4) disclose knowledge of any substantial defects or malfunctions in the major systems of the unit and/or common areas. The failure to fulfill certain of these obligations could not only subject the agent to actual damages but could also subject her to a public offense, fines and payment of attorney’s fees to the injured party.
On top of these disclosure obligations, Faresh-Karp poses an additional warning to buyers: “Buyers need to realize there may be other issues with a house that neither the seller nor agent are aware of and will only be uncovered by a more detailed inspection.” She recommends that buyers hire an independent, licensed inspector. At minimum, a home inspector, roof inspector and pest inspector should be hired because, contrary to popular belief, what you don’t know can sometimes hurt you.
The opinions expressed in this article are those of the authors and do not necessarily reflect the viewpoint of the SFAA or the San Francisco Apartment Magazine. The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. Candace T. Lam and Nicole M. Soltanzadeh are associates at Bradshaw & Associates, P.C. Bradshaw & Associates is a full-service law firm with a focus on litigation, property and business matters, including landlord-tenant matters. They can be reached at 415-433-4800. Copyright © 2006 by the San Francisco Apartment Magazine. All rights reserved.