The Importance of Disclosure
by Al Heavens
I enjoy receiving feedback or getting questions over my columns for Realty Times. That's the chief way I can gauge what you are thinking and then focus on the issues that seem to be uppermost in your thoughts. In a recent column, I touched on agency -- that is, who represents whom in a real estate transaction. I talked about how the law defines agency, the importance of agency disclosure to the buyer and the seller, and why buyers and sellers should make sure that they read and sign the agency-disclosure form before signing the contract with the agent. One reader suggests that dual agency, designated agency and transaction licensee, were terms that were designed and adopted by the real estate industry for its own benefit and not that of the consumer. The reader went on to recommend that for a consumer to obtain the full benefit of agency representation and the undivided loyalty of his or her agent, that consumer might consider an addendum to the listing or the buyers' broker agreement as follows: "Notwithstanding anything to the contrary, and in the event a conflict of interest should arise, the undersigned principal at his or her option, shall have the unilateral right to terminate this agreement without cost or obligation, by written notice delivered to the broker." The principal always can waive his or her rights or amend the agreement and eliminate the "notwithstanding" addendum, but the main issue is that the consumer maintains his or her options. I'm not thoroughly convinced that the law was designed solely to protect the real estate agent, since -- and you can clear this up for me -- I don't think agency issues were at the top of any Realtor list of worries before the laws were passed. I also believe that the impetus for the agency laws came from consumer groups. I also wonder if the reader's provision is included in the agency laws of most states already. The laws in many states that require seller disclosure should be designed to protect agent, buyer and seller equally. A reader buys a house as-is for $25,000 above the asking price in a bidding war. When the buyer tries to obtain homeowners' insurance, he is told that there was a water-damage claim for $15,000 five years before. He then hires a home inspector, who finds slates missing from the main roof and holes in the porch roof. None of this was disclosed by the seller, nor does it seem from the reader's e-mail, did his agent even suggest to the buyer that the sale be contingent on a home inspection. The agent could have used the home inspection as a negotiating tool -- either to have the problem taken care of by the seller before settlement or to have the price reduced by the cost of the repairs agreed to by both parties. This is not the end. The home inspector finds evidence that some sort of pesticide had been used inside the house at some point. It wasn't disclosed. Then, in the basement storage area, the buyer and the inspector found a big hole, covered by a mattress and a "big, flat piece of wood." The agent says he never saw the hole when he came to see the house. So the buyer asks, "Why wasn't this disclosed?" and his agent replies, "it isn't considered a defect." I realize that in this real estate market, many buyers are left in the cold if they don't act quickly, but doesn't this story make you want to scream? First of all, this house is not worth $25,000 above asking price, no matter how many people are bidding on it. Second, if the buyer and the agent had opened their eyes when they first laid eyes on this house, they would have seen most of these problems. This is not a house to be purchased "as is" at $25,000 above the asking price. This also is the best argument for making the sales contract contingent on a home inspection. I also think that a hole in the basement covered by a mattress and a flat board is indeed a defect that needs to be disclosed. When I sold my last house, my agent told me to disclose everything, no matter how trivial I thought it might be. And I did. Everything. Because I, as the seller of a house in which I had lived for 14 years, should have been at the least aware of every flaw. Honesty is always the best policy, whether buyer, seller or agent. You might not get the price you are asking, and the sale may not be an easy way to make a commission, but it at least you'll be able to sleep at night. | 
