DEAR BARRY: As a new Realtor, I’m concerned about liability for undisclosed property defects. This was discussed often in my real estate classes, and we were advised to make sure that every deal has a home inspection. But what if the home inspector doesn’t do a good job? If major defects are missed by the inspector, am I liable for nondisclosure? –Amy
DEAR AMY: There are two ways that an agent can be liable for defects that were missed by a home inspector:
1. If the agent selects the home inspector, either by calling the inspector to set the appointment or by specifying which inspector the buyer should call, the buyer can blame the agent for "negligent referral." Who you recommend and how you recommend are therefore vitally important.
The best policy for agents who wish to avoid this kind of liability is to prepare a list of the most thorough and experienced home inspectors available. This list should be given to buyers, and they, not the agent, should select the inspector and call for the appointment. Furthermore, the list should be an all-star roster of the best home inspectors in the area, the ones who provide the most comprehensive disclosure.
2. Agents can be threatened with liability for undisclosed defects even when they’ve done nothing wrong. In a lawsuit, attorneys tend to name everyone in sight as defendants because the more defendants named, the more potential for monetary settlements.
In a typical disclosure case, defendants might include the sellers, the sellers’ agent, the buyers’ agent, both brokers, the home inspector, and the termite inspector. An honest agent who does everything possible to provide full disclosure can still be threatened with disclosure liability.
The best policy to avoid frivolous lawsuits is to be as proactive as possible in matters of disclosure. When questions arise regarding whether to disclose a particular fact or concern, the best policy is to err on the side of disclosure.
In the final analysis, disclosure liability can never be completely eliminated, but care should be taken to limit it as much as possible. Telling the whole truth is the best strategy for avoiding liability.
DEAR BARRY: In a recent article, you said that sellers should hire a home inspector to provide full disclosure when the seller plans to do an as-is sale. In Washington state, where I live, an as-is sale is not legal. You should let your readers know this. –Reggie
DEAR REGGIE: You apparently misunderstand the meaning of the term "as-is," as it applies to real estate sales. There was a time when "as-is" meant "buyer beware" and "take-it-or-leave-it." In those days there were not disclosure laws, and there were very few home inspectors.
In contemporary real estate, "as-is" means, "We won’t fix anything, but here is a full list of known defects." In Washington, as in all other states, this is an entirely legal process. All that matters is to provide full disclosure.
With limited exceptions, there are no requirements for sellers to make repairs. A common exception in some states is a requirement for sellers to provide functional smoke alarms in specified locations.