Reader Question: I am concerned some important issues may be missed in inspections. In one condo development, for example, the ground in the heavy clay soil was not graded properly, and the internal construction had some major flaws. The selling agent at the condo explicitly stated he did not want to know about the issues. I was surprised at his response. What is the responsibility regarding the disclosure of construction or other known issues when selling a property by a Realtor? Michael S.
Monty’s Answer: This is difficult to answer, as there are a number of factors to be considered. The location of the property determines the best answer after a review of state law. Real estate inspections began about thirty-five years ago and continue to evolve. Some states have yet to embrace inspection regulation. Let us review inspections and other factors that impact the situation you described:
- Some states require a home inspector be licensed, some do not, and other states decline to regulate inspections entirely. Some real estate agents have informally abdicated the inspections responsibility almost entirely to the home inspector under the theory this limits liability. Why the agent you encountered turned his back is unclear, but abdication to others is a possibility. Here is a home inspection link https://dearmonty.com/home-inspections/ to learn more.
- Every state requires a real estate broker and agent to treat all parties to the transaction fairly. But the definition of “ fairly “ and the circumstances involved in particular instances can qualify the word. Many states require agents to disclose in writing any material adverse fact they observe in a home to any interested party. The definition of a “material adverse fact “ can also be different state by state. Generally, it means the “ fact ” has a negative impact on value.
- The barriers to entry are low in the real estate industry and the qualifications for participation vary by state. Then, education, training, and supervision requirements vary widely. The expectations from both business and consumer, or lack thereof, allow for marginal practitioners. As an example, a homebuilder can find a market for new homes that sell for $75.00 per square foot (PSF), and other builders’ find markets for $300.00 PSF homes. One may expect “ major flaws “ in a $75.00 per square foot building, but not in a $300.00 PSF home, yet both of those homes passed the municipalities inspection department standards to receive an occupancy permit.
Not everyone in the real estate and related industries is poorly educated, trained and supervised. There are excellent real estate companies, home inspectors, real estate agents and homebuilders. The challenge is to identify the competent ones, and that is not an easy task. For example, every real estate sector complains about “too many incompetent people,” but incompetent people say that too. They do not see themselves as incompetent. Here is a link to https://dearmonty.com/top-10-real-estate-myths/ that adds color.
- Many states require a home seller to complete a property condition report and give a copy to any interested prospect. Sellers are sometimes coached about how to best fill out the answers or even forget significant events. The quality of this document is based on integrity and memory.
- Personality, skill sets, ethics, common sense and other aspects of the human condition vary widely among practitioners. Those same attributes (or lack of them) on the customer side of the transaction can create a perfect storm. The National Association of Realtors (NAR) annual consumer survey reveals two out of three home sellers only interview one real estate agent, yet only about half of all surveyed home sellers are completely satisfied. These are not isolated incidents. Additionally, real estate is consistently one of the top two or three consumer complaint generators of state-regulated businesses.
It is not always the agent. Customers can plow into a real estate transaction representing they know the way, only to experience a major issue. The regulators find against the customer or may decline to investigate a complaint if they determine the problem is the customer and not the agent.
Until the industry grasps the fact they must work harder to deal with these issues, every buyer, seller and homeowner should interview multiple recommended people and choose carefully when selecting any provider. Improve your outcome by taking a ” caveat emptor ” position and better prepare yourself to step onto the playing field. Practice the old proverb; “Trust, but verify.”
“Richard Montgomery gives no nonsense real estate advice to readers most pressing questions. He is a real estate industry veteran who has championed industry reform for over a quarter century. Send him questions at DearMonty.com.”