Will Our Real Estate Agent Tell Prospective Buyers About Home Defects?

The listing real estate broker might have inside access to key facts, either from talking to the seller or walking around the house and property. Exactly how much of this information must the broker pass on to prospective home buyers?

By , J.D. · University of Washington School of Law

As a home seller, one of your important obligations is (according to the law of most states) to advise buyers concerning the physical condition of the property and related concerns (such as environmental hazards or neighborhood nuisances). You might be legally required to fill out a disclosure form concerning the property, which will in all likelihood be provided by your state's real estate commission.

Some sellers mistakenly try to hide issues, in an effort to keep the home price up, like a foundation that's crumbling, walls full of dry rot, or neighbors whose goats regularly leap the fence and destroy the landscaping. There are many reasons not to hide such things, however: You risk buyers becoming angry. If they discover the problems during a preclosing inspection, they might push back hard, and negotiate the price down. If they discover the problems after closing, they could sue you.

Consider also that as the seller, you are not the sole source of information for prospective home buyers. Your real estate broker might have inside access to key facts as well, either from talking to you, from historical experience of your house's transfer between owners, or from walking around the house and property, observing with expert eyes. Exactly how much of this information must the broker pass on to prospective buyers? And will the broker need to fill out a separate form for this? That's what we'll discuss here

What Law Governs Real Estate Brokers' Disclosure Obligations

Just as state law sets forth your disclosure obligations as a home seller, it might also address the issue of what real estate brokers know (or have learned and observed) and should pass on to buyers. The relevant rules are typically found in state statutes or administrative regulations governing real estate transactions or else real estate agents' professional conduct. Separate fraud statutes might also prohibit brokers from lying or making misrepresentations to buyers in the course of a home sale.

In no state are disclosure expectations of brokers as high as those upon the actual homeowners (the sellers). The broker is never required to independently investigate and determine whether a seller's disclosures are accurate, nor to perform separate investigations of the property. And brokers rarely have to fill out a standard, comprehensive form. After all, they haven't lived in the home.

(California is a notable exception. Real estate brokers there must fill out a Agent Visual Inspection Disclosure form.)

But that's not the end of the story, as described next.

What Most States' Laws Require of Real Estate Brokers Regarding Home Disclosures

Despite the fact that they aren't usually given a detailed form to fill out, expectations placed upon real estate brokers can be quite broad.

In Arizona, for example, the state Real Estate Department requires brokers to "disclose in writing to all other parties any information ... that materially or adversely affects the consideration to be paid by any party to the transaction, including: ...Any material defect existing in the property being transferred" or the "existence of a lien or encumbrance on the property...." (See § R4-28-1101 of the Arizona Administrative Code.)

An Oklahoma listing broker must make sure the home seller's disclosure statement and any amendments to it are available to any potential homebuyer before the seller accepts the buyer's offer to purchase, as well as disclose to the purchaser any known defects in the property that were not mentioned in the disclosure statement. (See 60 Okla. Stat. § 836(A-B).)

In Washington State, the broker must disclose "material" physical defects of a property, but only those that the broker actually knows about and that would not be apparent or readily ascertainable to the buyer. No proactive investigation is required. (See Revised Code of Washington,§§ 18.86.010, 18.86.030.)

As you can see from these examples, state laws tend to regard broker disclosures as a backup for what the home seller might have forgotten, failed to mention, or become blind to after years of living in the house.

Remember that not every state requires seller disclosures, however. Your broker or state real estate commission should be able to tell you more about specific disclosure obligations where your home is.

Are There Limits on What a Real Estate Broker Will Disclose to Buyers?

Your listing agent has a fiduciary duty to protect your interests, and the laws do not seek to interfere with that. So, for example, if you were to tell your broker that you were willing to lower your price if pushed, the broker should not reveal that to the buyer. It's not a home defect, after all.

Also, some states laws expressly exclude certain information from broker disclosure requirements.

In Illinois, for instance, the listing broker need not convey information about:

  • an occupant of the property who is infected with HIV or any other medical condition
  • an occurrence on the property that did not affect its physical condition
  • an occurrence on neighboring property that does not affect the physical condition of the property to be sold, and
  • a physical condition on neighboring property that does not reduce the value of the property to be sold. (See 225 ILCS 454/15-20.)

And in Colorado, the seller's broker need not tell buyers about facts or suspicions regarding circumstances that might psychologically impact or stigmatize the property. (See C.R.S. § 12-61-804 (2)).

Again, check with your real estate broker or state commission on real estate for details. As a seller, it is important to know what your broker must tell buyers, so that you can properly advise the broker and avoid liability for misrepresentation or failure to disclose.

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