Better Know a Disclosure

 

I encountered an op-ed piece this week which reminded me that it might be time to boldly venture into Boring Land. Boring Land is that place where we keep all of our contracts and disclosures, a place we visit occasionally when we receive the periodic Ask the Brokers question regarding the riveting world of transactional procedures and statutory obligations.

So, without further ado and lest your heads explode with giddy anticipation, I bring you our first installment of Better Know a Disclosure.

Disclosures are made during the residential real estate transaction to inform and to protect. These disclosures protect the buyer, in that they are presented with all material facts and considerations which might affect the decision to purchase or not, and they protect the seller, from potential future claims which might arise out of a failure to disclose. And they protect the agents for both from liability. Much like there is no guarantee that I won’t walk out the door this morning and be struck dead by an errant golf ball, the knowledge that this is possible allows me to make an informed decision and even take reasonable precautions. Fortunately for me, my home is located at least ten miles from the nearest driving range, but you can be sure I am always alert. This is because I read my…

Statewide Buyer and Seller Advisory (SBSA)

This is a ten page document that reads like a stream of consciousness. Number 18 on the hit list reads:

Buyer and Seller are advised that if the Property is located adjacent to or near a golf course there is a possibility that golf balls may damage the Property or injure persons or pets on it. Additionally, persons playing golf may enter the Property to retrieve errant golf ball or for other purposes.

So, that is what the dude with the nine iron is doing in my gazanias!

To the untrained eye, this may seem a little goofy. The reality is that each and every disclosure exists because, at some point, someone sued someone else over the issue. The fact that we have told your buyer that Fido might find a Titleist up his nose one morning does not guarantee he won’t sue both of us when this happens, but it does afford a level of protection that he won’t prevail in court.

Number 25 of the SBSA packs a bit more of a punch. Under Neighborhood, Area: Personal Factors, the buyer is advised that many things may affect their intended use and enjoyment. The list is long, but it includes things such as schools, crime, law enforcement, and “conditions and influences of significance to certain cultures and/or religions, and personal needs, requirements and preferences.”

This disclosure affords the seller and their agent protection for two main reasons. First, consider that “personal factors” are by their very nature subjective. If you ask me, “Are the schools good?” how do I know that my “good” and yours are aligned? What is “a lot” of crime? What constitutes “nice neighbors?” Second, and more importantly, I as an agent am forbidden from speaking in specifics about these things, with the obvious and biggest no-nos being related to race and religion. I could be charged with steering, with blockbusting and with Fair Housing Law violations. And I could lose my license.

In the article I alluded to, the contention was that agents get paid the big bucks yet want to relegate their duties of discovery to their clients, agents just want to sell the home at any cost (presumably so they can pocket the big commission check and themselves hit the links), and agents are lazy-lazy-lazy. The writer’s Exhibit 1 was Megan’s Law.

Megan’s Law Database Disclosure

This is the language which appears in the California Association of Realtors Residential Purchase Agreement:

Notice: Pursuant to Section 290.46 of the Penal Code, information about specified registered sex offenders is made available to the public via an Internet Web site maintained by the Department of Justice at www.meganslaw.ca.gov. Depending on an offender’s criminal history, this information will include either the addresses at which the offender resides or the community of residence and ZIP code in which he or she resides. (Neither the Seller nor Brokers are required to check this web site. If Buyer wants further information, Broker recommends that Buyer obtain information from this web site during Buyer’s inspection contingency period. Brokers do not have expertise in this area.)

This Megan’s Law site is an important one, and we disclose it as being a valuable resource to the concerned buyer. However, I can not say this emphatically enough - Sellers and their Brokers SHOULD NOT attempt to provide affirmative information regarding the presence or absence of neighborhood sex offenders. This is not lazy; it is prudent. It is prudent if I want to keep my client out of court, and it is prudent if I want to keep my license.

Now, to be clear, if I have specific knowledge of any issue which might affect the buyer’s decision to purchase, I must disclose. If my selling client has knowledge, he must disclose. And, if my client simply represents something of potential import to me in passing, I have the responsibility to share this information with a buyer. This applies to both golf balls and sex offenders, and to dozens of other issues both large and small. So why shouldn’t I save my client, buyer or seller, a little time and check out the Megan’s Law web site myself? Because of the danger that I might misrepresent.

• The Megan’s Law web site is not mine; it is designed, populated and presented by the Department of Justice. I have absolutely no way of ensuring that the information is absolutely current and 100% accurate (which it is not).

That is it. Period. A “dot” may be present on the map when in fact no sex offender resides at that location.  A “dot” may not be present when a registered sex offender does live at a location. And, I can give a real life example. We had an home in escrow several years ago. The buyer visited the web site and found that a registered sex offender was shown living one block from this home. The seller had no knowledge, and we had no knowledge, but the buyer flipped out and canceled contract, which was within their rights. Within days, the home was back in escrow with a new buyer. This time, I did have knowledge and we did disclose. The new buyer chose to be more thorough, however. They knocked on doors up one side and down the other of the street in question. The neighbors told them that the gentleman no longer lived in the home, was in fact in the hospital and would likely die. Escrow closed. Within a month, the “dot” mysteriously disappeared from the map. Should I have knocked on doors? No. It turned out the neighbors were right, the map was wrong, and the buyer was happy with their purchase. But, it might not have turned out this way at all, and my clients and I would have been telling it to the judge.

The flip side of this scenario is the one that frightens us most and keeps our attorneys up nights. What if I check the database and, finding no “dot,” give the high-five, all-clear? What if, based on my representation, the buyer answers his door to receive his first Welcome to the Neighborhood bundt cake from Charles Manson who lives two homes over in the cute single-level Craftsman?

Let’s Get Sued (Again)

Real estate agents are a lot of things. We are advisers, we are negotiators, we are marketers and market experts. And this list just scratches the surface. The list of what we are not is longer yet. We are not plumbers, roofers, hazardous materials specialists, or criminologists. We do not set school boundaries, we do not draft and approve land use plans, and we can not guarantee that what we know today will be true tomorrow or even that what we know today based on the representation of others is in fact the truth today. And we are not mind readers. I like the people in my neighborhood; you may find them infinitely unlikeable. I like my daughters’ school fine; when your child fails European History, you may have another opinion entirely.

We disclose our britches off, but there is a limitation to our knowledge and expertise in all areas that may be of import to all buyers. We have many responsibilities and obligations, all of which carry significant liability baggage for both ourselves and our clients. Risk avoidance is not lazy, its not lacking in compassion and it is not a shirking of responsibility or duty. Risk avoidance is in fact a large part of our duty to our clients. It is a harsh reality of the world we now live in.

In our next installment, we will talk about the San Diego Local Area Disclosures, beginning with all-important Number 1:

Buyer and Seller are advised that various public attractions and amusement parks may impact the traffic in the area near the Property or create noise which may be of concern to some Buyers.

I am ashamed to admit that as a part of my services, I do not perform peak hour traffic counts at nearby intersections, I do not time your commute to work, and I do not maintain sound influence charts. There are agencies, however, who do these things, and I am happy to give you their contact information. I suspect somebody has been sued over this one as well.