Chapter 9 - Mandated Disclosures Flashcards
What are some basic agency disclosures?
Agents must inform their clients of their agency relationship, which should occur early in an interaction with clients and customers (around first meeting). Dual agency is not legal unless the multiple parties are informed in writing of the relationship and give their consent
Who does the agent not have an agency (has a customer) relationship with?
When representing the seller, the agent’s customer is the buyer
When representing the buyer, the agent’s customer is the seller
What are responsibilities of RE agents?
1) Disclosure - must disclose any material and relevant facts, data, or info
2) Puffery - reasonable is allowed and must be stated as an opinion
3) Compensation - agent should disclose the source of compensation that the agent will receive
4) Principal status - licensee must disclose any ownership or is otherwise a principal in a transaction, or has an interest (like family listing a property)
What is the standardized condition form or Seller’s Real Property Disclosure (SRPD)?
Where a seller is required to disclose defects in structure, components (gas, electric, plumbing), soil conditions, constructions defects, etc. to the best of the seller’s knowledge
What is the agent’s role in perparation of the SRPD?
The agent has no role in filling out the SRPD. They responsibility is to deliver it, but should not fill out the form
Agents should be aware of conditions of property and determine if conditions exist that should be further investigated
How might a seller misrepresent the condition of a property on the SRPD?
1) defect was latent (not visible) and the seller didn’t know it existed
2) seller wasn’t “technical”, and didn’t understand the significance of the problem
3) seller kept defects off of SRPD
1 & 2 can be considered “careless misrepresentations”, while 3 is fraud and could result in being sued
What are home warranties?
An insurance policy taken out by a homeowner or buyer against failure of a system like heating, air conditioning, plumbing, electrical, fridges, stoves, etc.
Often, buyer’s agents write into the purchase contract that seller must buy a home warranty. Sometimes these become effective at escrow or as soon as written
What is the duty of further inquiry?
When representing a seller or buyer, an agent is required to “discover and disclose” any material fact of which the agent should have known
Agent should be able to “spot” potential problems and have them pursued until the answer is found
What is the agent responsibility to inquire about “red flag” issues?
Agent should check and “red flag” issues that the buyer/seller should follow-up on. Like:
- moisture or water in the basement
- cracks in foundation or basement walls
- failing air-conditioning compressor, noisy
- environmental hazards
- underground storage tanks
- defective roofing or flashings
- water damage on walls or ceilings
- insects
What should you do to protect client from potential issues and what can you do after that?
Have an inspection. Usually will cost $200 to $500. If repairs are needed, there are 3 ways to proceed?
- buyer can ask seller to fix
- buyer can buy home “as is” and fix
- buyer can ask for price reduction
What are technical details?
Agents should be aware of quality of information and be sure that representations are correct. If a house is listed in the tax assesor as being 1,200 square feet but is actually 1,500, agent should figure out what the difference is
Caveat emptor (let buyer beware) is still applicable in some situations, all of the parties of transaction expect professionals to find them
What are material facts related to property condition or location to look out for?
1) Land/soil conditions - septic tanks, water wall bad water, location under air force base
2) Pest, mold, or environmental hazards
3) Accuracy of lot or improvement size, encroachments, and easements
4) Condition of electric and plumbing, equipment or appliances
5) Structural - including roof, gutters, doors, windows, etc.
6) Known alterations or additions
7) Location within natural hazard or specialty regulated area
What are material facts relating to public controls, statues, or public utilities?
1) Local tax assessment districts, special county or municipal assessments, or other liens
2) Local zoning and/or planning info, including the existence of master plans draw up by municipalities
3) Stigmatized or psychologically impacted improperty, including Megan’s Law issues (attack in home, registered sex offender next door, etc.)
4) External environmental hazards
5) Boundaries of schools, utilities, taxation districts, flight paths
