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Todd, I agree and highly recommend an inspection on every home my clients buy and especially on bank-owned homes or short sales that have sat vacant for a lengthy period of time. The inspection report will determine whether they go ahead and purchase or not.

I also recommend an inspection on everything.  The house, pipes and anything else that I can think of that may be a problem.

Todd - I refuse to take NO for an answer concerning inspections on  properties for my buyers, And if it a known material fact that was uncovered from a previous inspection, The listing Agent should have a duty to disclose it. But just get it inspected anyway

Todd, this raises some interesting issues that I'm going to guess will be litigated one of these days soon - if not already.  But what is interesting to me is the number of agents who are dealing with "normal" transactions who do not get the importance of revealing material facts to subsequent buyers when someone voids a contract on a home inspection issue.

Todd - I agree.  As-Is condition means you MUST inspect and the buyer "decide"  if they are willing to proceed with needed repairs.  I am working a transaction now (my buyers) and bank owned/seller - once it's closed I have plenty to share about it too - it'll be a blog post regarding appraisals on AS-IS bank owned properties.  

Todd,

I, too, recommend inspections for every buyer.  I even recommend them for sellers for homes over a certain market value.  Inspections are cheap insurance!

That is great advice Todd...too many buyers think the appraisal will uncover problems: it won't

Todd - I recently sold a short sale and the listing agent did disclose the outcome of the previous inspection report with us. 

My clients obviously had their own inspection and we made sure their inspector paid special attention to certain things that were noted on the previous report and it turned out nothing was wrong with a few of the issues.  When I discussed the outcome of our inspection with the listing agent he told me the previous buyer's had a "friend" who was a retired engineer do their inspection. 

So in this case the listing agent could have lost numerous buyer's due to sharing the iinspection report, which a licensed inspector didn't agree with.  However I think this is a rare case.  Mold is usually mold, leaks are typically leaks, AC's not working usually don't work, etc.

This is an excellent question.....

Not disclosing a material fact seems highly unethical.  I would hope that it might be criminal if that agent was acting with a dual agency.

The banks have the feeling they don't have to play by the same set of rules as everyone else. We need to protect the buyers.

Todd - Oh Lord, the stories I could tell (that's a whole other post).  In the past two years, I have had quite a few transactions where the REO bank seller and their REO listing agents didn't disclose facts about the property that they undeniably knew to be true. 

Even when I discovered documentation proving that they knew and confronted them with the documentation, they still continued to play dumb.  SERIOUSLY!!!

I hope you turned in that agent.  That is just foul play.  Our clients expect more out of us and our industry!

It's a good thing to have an inspection! I've noted that when the house is a short sale...the client doesn't care one way or the other about being truthful on the disclosures. Especially since they aren't required anyway!

Its a tough question.  Where I come from REOs are exempt from disclosure.  As a listing agent my job is to give my loyalty to my client.  Disclosure could harm my client, the buyer still has the right to obtain and rely upon their own inspections. 

Every addendum I have seen while selling bank owned properties state that the seller or agent makes no representation, rely upon your own inspections. I would say that an selling agent disclosing info hurts the seller (his client).  Even though its an "evil bank" they still hive the right to expect representation. 

Chad - Even if the do represent a client, by law you can't hide material facts about a property that could affect the sale. Let's say that you know the land underneath the property is slipping away and the property could fall down within six months. If you don't disclose that and you know, then you will be held responsible when it happens.

Interesting, we just discussed this at an Ethics Class on Saturday, and very much felt it was ETHICALLY WRONG to not disclose!

Best regards, Gretchen

Todd I find it very strange that the bank does not need to give a disclosure on know defects. Is a statute written that specifically says that?

In NC if the bank hasn't lived in it, they don't need to disclose jack. Inpsections are crucial to the process. I'd hate to be the agent who failed to recommend an inspection and have something come up after the sale.

A material fact is a material fact and agents should always disclose.  It's not always the popular thing with your sellers, but they (and we as agents) are liable.  I also insist on an inspection for all my buyers.  Never had one refuse.

All I sell is REO. The best way to do business is to find everything wrong with the property you can from day 1. The banks selling REO actually want full disclosure because - just like in the case you cite - it reduces time on market, holding costs, depreciation, etc.

 

Todd, the inspection is absolutely necessary. The listing agent is required to disclose.......

I always highly recommend that my buyers get a home inspection. If they absolutley refuse our state forms have a form for home inspections...and I have my buyer sign it. In most cases my buyers do get a home inspection..it is well worth the money.

One thing I have noticed in our area is when a property has a problem and isn't selling, the banks switch agents and the new agent may not be aware of a known problem by the bank. If I am aware of a problem whether I am the listing agent or I have shown a property that I know has a problem I always disclose.  Not only are we required as REALTORS to disclose adverse facts, I could not sleep at night knowing someone bought a home with problems that I knew were there.

I can say that there are agents in my area that represent REO's that do verbally disclose problems that they are aware of...even if the banks forms do not disclose anything.

Inspect, inspect, inspect.  Foreclosures and empty properties can have ALL KINDS OF ISSUES!

Todd I absolutely agree with you but until someone goes after them and the agents that represent them, the bank will do as the wish not matter what we think. "Let the buyer beware".

It's one thing for banks to have a minimal disclosure because they never lived in the house. It's a completely separate matter to not disclose inspection reports that have been done on the house by previous buying efforts. That second category of reports generated by the current sales listing has to be disclosed by the listing agent.

In Illinois if an agent has knowledge of a defect, they must disclose.  I tell my sellers to tell everything they know because if they don't, I will.  It is required of me.

Even if the bank is not required to disclose a material defect, my understanding of the law is that the real estate agent IS indeed required to do so. I would love to hear what a real estate attorney has to say on this topic!

I realize ever states laws may be different. However ethics need to come first in our business. If the listing agents knows their is an material fact, they are required to disclose it , if they fail to do so they should then be held accountable. Is it worth losing their license? No one should be exempt from the disclosures required by each state. Banks and REO should not be exempt.

I have my clients sign a "for your protection get an inspection" form.       I just let them know better to be safe now than sorry later.    I also tell them these guys work for you..they will tell you the good bad and ugly.

Each state has its own laws.  In Minnesota, sellers have the option of asking the buyer to waive seller's obligation to disclose material facts.  Banks invariably insist on the waiver.  Interestingly, the listing agent also has a statutory obligation to disclose material facts which cannot be waived.  Now, here's a startling revelation: not all people are honest and trustworthy, even some real estate agents.  Trust only what you can verify.

Hi Todd--This is a prime example of an ethical issue that needs to be exposed.  We are seeing such things here in Florida and it is time to bring more attention to this problem. 

REAs are paid to either sell the property or help a buyer purchase one.  Non-disclosure of issues known to the listing agent would seem cause for violation of ethics laws in your state.  Turn that agent in.  Alert the state about the banks practices as well....the more this is done, the bigger the case will build and perhaps change might ensue.  Perhaps not, but I do not believe 'doing nothing' about it is the correct choice.  Good luck and do the right thing!!

I think this situation is a disgrace and this guy gives our entire industry a negative reputation with the public. Whenever it's close - I disclose! And my buyers are always told to get inspections - even my investors!!!

on the positive side: There are agents daily getting fined for these types of things and it will catch up to him. someone will file a complaint with the state and he will hopefully get reprimanded. I took a CE class on this recently and the speaker read several cases aloud where the agents were fined or suspended for acting unethically. One was as simple as a listing agent who stepped on wet carpet in a basement. She failed to disclose the wet carpet, because she figured the buyer could feel it too, and she was fined.

As for the listing agent in your story, What goes around comes around... 

Todd -

Agreeing both ways here - the agent MUST disclose, and the buyer SHOULD ABSOLUTELY get an inspection.

True, the bank will not likely make repairs - but the buyer should still have the option of "thumbs up/thumbs down."

Advising agents who say otherwise are violating their fiduciary responsibility to their clients - and that is a serious problem!

DEAN & DEAN'S TEAM CHICAGO

I agree with Dana. I really think you are on the hook as an agent, regardless of disclosure requirements for any other entity, if you don't disclose material facts - a legal interpretation would be most interesting. I don't remember anything from my real estate classes or continuing ed that mentioned any deviation from this.

as an appraiser (and real estate broker) If there has been a home inspection I request information from that inspection. After all they spend 3-4 hours with the inspection, my portion is 20 minutes to 1/2 hour. I took the licensing home inspectors class so I would be better informed and know what they are supposed to check. I think it makes me a better appraiser. ALWAYS get a home inspection. I've seen NEW construction and new renovations get a few items on a punch list. Depends on how thorough and knowledgable the inspector is. I have also found things on FHA the inspector missed. (due to that "representative" number thing) I check every accessible outlet, window, etc. If one outlet works does NOT mean every one in that room will or is correct. Same with windows, just because one works does NOT mean they all work. Just some insight. Justy a though: I COULD BE LICENSED AND DOING HOME INSPECTIONS, I PASSED THE CLASS. AM I... HECK NO, I'm not qualified, even if the state says I am, lol. Besides I hate crawl spaces and attics. An inspector must inspect those, an appraiser only "looks" in. Thanks!!! Any know material fact is to be disclosed upon identification of that fact. Even if the bank says, they don't know that realtor does and is accountable to the law. They could loose their license!!!

this drives me bonkers!  I do believe they should be required by law to disclose if they know a material fact.  My friend had a contract last year and the house was mold infested.  After the buyers spent $1000 on inspections and their loan wouldn't go through due to the fact it was mold mold mold positive and those inspections were forwarded to the list agent.........the home went BACK ON MARKET with all types of financing available.

This home ended up selling for $75K less than what it was worth at the time because of the mold.  If they would have just ponied up the $15K to fix the problem it would have preserved values in the neighborhood (did I mention this was my neighbor's house?) and netted them $60K more.

Nothing makes sense and this was a freddie house.  I believe about 5 freddie homes have gone in my neighborhood since and they killed their own nets by doing something so insane! (I don't believe this was a seller executed decision to NOT fix the mold problem, it was a list agent executed decision!)

I didn't review all the comments, so it may have already been said, but the answer is clear if you are a REALTOR(R).  If you, as the agent, know or have been made aware of a material fact, you have to disclose it to ANY potential buyers whether or not the seller knows or chooses to disclose it.  There is no gray area here.  I've seen many, many REO agents use the same tactic and they are violating the code of ethics, plain and simple.

As in all things Buyer: Caveat Emptor (Buyer Beware). I hold myself and my clients to higher standards for their protection and mine. I will not show a home I have not previewed. I will not sign a client on who has not provided a financial disclosure package (I got tired of buyers and sellers not being truthful long ago) which allows me to look at a snapshot of their position and not oversell a home, or not understand the real reason a seller is selling, or if they will be able to purchase a home. 

I don't have trouble firing clients either, if they are untruthful, because that will be a reflection on my ethics (you are judged by the company you keep). 

I believe there are ethics reprimands that can be sought for Realtors and bankers alike. If we don't hold ourselves to standards, we are worthless to the public and the communities we serve. I don't like hearing these stories, but they are all too frequent.

 

Lou

Todd -

You are a man after my heart-strings.  I have been advocating action on the part of our local Board and the Massachusetts Association of Realtors for this very fact.  The law is very clear by stating that all known defects must be disclosed by a listing agent.  I've seen cases where a listing has changed hands between 4 different realtors and finally rests with an REO agent who hides behind "as is where is - no disclosure".  Surely, there must be something in Realtor Ethics 101 that would suggest that the listing agent (No. 2, 3, 4, and 5) should make enquiries of the other agents about the property before they take the listing.

I've also seen instances where a broker puts in moth balls to cover up the smell of an underground oil leak in the garage - we have an (in) famous builder that buried oil lines under concrete slabs during the 50s and 60s in about 4 large residential communities across Eastern MA.  Fortunately, I knew from the style of construction about the potential problems with the house.  But when I enquired about the moth balls and the large stain on the concrete pad, the listing agent got upset with me and tried to use intimidation to get me to back down.  Even when I told him what the problem was (assuming that he just put the moth balls there to smell nice) - and reminded him that he was now "on notice" - he failed to address the issue.

I'm all for stricter enforcement of the disclosure laws.  Technically all homes are sold "as is" - but the home inspection is an invaluable tool for setting another set of trained eyes onto the house and to let a potential buyer know if there are any hidden or undisclosed defects that might alter their purchase decision.  Any other inspection points raised - as I've blogged to you before - should be seen by both the buyer and the seller as points for the next homeowner to address in the ongoing maintenance and repair of the property - none of which should prevent this sale going through.

Ethically I have a problem with a "known material defect" not being disclosed.  Is the sale so important that the bank's agent would knowingly plead ignorance?

Todd, California has our AVID agents disclosure and Realtors have the code of ethics.  We need all the good faith we can muster to see our industry's reputation improve.

I sell REO properties and the banks I work with disclose any repairs they make and provide the buyers with a copy of the repair invoices to sign and date as part of their separate addendum's.  The agent is responsible to disclose material facts.  It does not matter if the property is REO or not.  As a rule, I always inform buyers agents of material facts and let them and their buyers make their own decisions on inspections. Bulk REO agents have become a plague on the system.  They cut and paste standard comments, they don't disclose material facts in many terms, some have their own PA's and documents that they require your buyers to use and they reject PA's that they don't like without presenting to their clients.  I run my REO listings the same as arms length sales to avoid all of these issues.  Talk to your board if you have an issue with an agent.  We should all be held to the same expectations.

In Wisconsin a defect covers all issues pertaining to structural and safety.   I showed a home and wrote an offer to purchase.  The front cover of the furnace was off and I could clearly see the heat exchanger on the bottom in pieces.  I suspect some one had also noticed this.  I told the Listing Agent about the furnace.  Of course the reply was, "you are not a licensed inspector and can not make that determination."  The inspector looked at the furnace and recorded the defect in his report.  The bank came back saying the furnace would need to be inspected by a licensed furnace repair specialist.  After another $80 and 1 minute, the licensed furnace repair specialist wrote up the same findings and supplied an estimate to replace the furnace. 

This is where is gets interesting.  This was the last day of the inspection contingency.  I emailed an Amendment requesting the furnace be replaced, attaching the reports which indicated a major defect regarding a safety issue.  The bank calls me and says, "trust me, we will replace the furnace."  They refused to sign the Amendment and fax it back but wanted me to tell the buyer to trust them.  I gave them until 6 Pm and faxed in a Notice based on defects and a Cancellation. 

I talked to my Broker.  The Listing Agent was responsible for passing this information along to future buyers.  The bank cancelled the Listing contract and hired a new Listing Broker.

Do you think this bank passed along information regarding the defects?

So many times we get an excuse from our co-brokers that they cannot get a Sellers Disclosure because the seller was an investor.  I tell my agents that that does not preclude the Sellers nor their agents from disclosing material defects if known.  We have a separate disclosures for investors who never lived in the house but we make them sign off that they know of no material defects.  Even a bank may know of a problem from another offerer and SHAME ON THE AGENT for misrepresenting the property

Very interesting post and I can relate to some of the anecdotes as well. I have always found it odd that a contract can go void under a home inspection contingency and yet the listing agent doesn't seem to know what was in the inspection that caused the void. I always tell my clients to get their own inspection.

Over teh last few years, I have worked with some excellent REO listers who have told me there is NO WAY FHA will fly on a deal due to an inspection issue. My clients always want to fight it, but I tell them that the agent is doing the right thing and to move on.

Thanks for the great post.

 

 

I absolutely think without hestitation if they know it they must disclose it!!! I think it is horrible that if they know they cover it up. Although they may be getting away with it, I think if they landed it court... they would be in big trouble.

Always get home inspection even when paying all cash. Yes, you might be able to fix it but best to know what the issues are!

 

I always highly recommend an inspection for every house unless its brand new with a one year or longer builder warranty and the builder is in good shape financially.  Even with a builder warranty the buyer should obtain proof of the builder's financinal condition because a warranty is useless if the builder is in bankruptsy or out of business.

Many of my home buyers have been surprised to find out how many items needed repair or service that they didn't notice or find with their own inspection.

My foreclosure and short sale buyers are always informed about the risks of buying an AS-IS home or commercial property.  Every time its been a foreclosure, the bank has refused to give any information whatsoever.  They hope the buyer doesn't care.

Home inspections are a must.  Every time.  No matter what.  I feel the exact same way about disclosure.  We have told our clients before "we won't lie TO you....and we won't lie FOR you.

I've seen some of the same things with fix and flip owners and their agents.  For example, we just did an inspection on a house where the water heater was listed as brand new when in fact it was ten years old, they new about high Radon levels in the house, and that the work they did was non permitted and not up to local building code...apparently we are the third group to spend time and money for an inspection. 

Yes, I totally agree.  These home inspections are very important, even if it is a "sold as is." Nice blog.

As a Realtor, it would be unethical not disclose known faults. And I always advise my buyers to have their own inspection done, even when a previous inspection has been disclosed.

Yes, this practice is common place where I live and work, which is the North Carolina Triad area.  Listing Agents for REO properties are practically invisible to other Agents who request information that may be available on a property that a buyer client is asking about.  Getting a return phone call or email seems to be a real bother to many of these Listing Agents.  It's like they just expect each buyer to find out all they can about the property, even if they may already have that information. 

Sharing information on these types of properties for sale should be manditory, regardless, if "sold as is"....when the defect is known.   Why the state real estate commissions don't enforce more disclosure is a mystery.  I guess it's just the work load of a poor bank individual, who isn't paid enough or staffed well enough to handle such matters... may be the root of the problem. 

Great Post! 

 

Who owns the inspections report? Do you, the real estate agent have any opportunity to discuss the result with the inspector? Who determines if this inspector is qualified to even look at this type of home?

What if a previous buyer made an offer on this home after an inspection at 35% of value and the seller flatly rejected this attempted theft. Now the spurned buyer delivers a report saying the comps say it not worth a dime and "my inspector suspects a sink hole beneath the pool." Based on many of arguments many have made, an agent must disclose the deliberate sabotage of toxic buyer.  This nasty buyer will be waiting in the wings to file an ethics complaint when their subordinate visits the home at a future showing and you don't disclose a clearly 'fabricated' finding. Right or wrong, you're in for a unpleasant ride.

Wow! Why do you folks want to be in real estate!!!  (smiley)

While an individual  seller may escape unscathed for failure to report a material fact about a property, a Bank as a seller may be exempt from disclosure, however, if they are informed of a material fact and choose not to do anything about it and instruct their listing agent not to disclose it, WOW. I think some regulators would like to see the facts and maybe an attorney general or 2.

REO agents know the game to keep their bank/sellers happy. They put aside their ethics so they can keep the gravy train coming. Report them to the appropriate party in your state and get some disciplanary actions taken and posted for all to see.

My feeling is that practitioners need to take control of our business and report the bad apples. Do it often and with a sense of responsibility. More REO's are on the way, so if you let this practice continue, it will just undermine our image even further.

 

Todd,

Having had the experience of having a client purchase such a home without inspection only to find surprises within the walls, I have to agree with everyone else who has said that getting the inspection is a must. That said, I also think that an agent representing a bank seller who does not disclose information learned on a previous buyer's home inspection for a failed contract is certainly putting himself in an ethically questionable position, and may even be exposing himself to lawsuit risk.

Dan Hartman

This is a great point. At the beginning of the year REO list agents would offer credit for repairs toward closing costs in lieu of repairs. Knowing a home is sold "AS IS" does not mean a buyer has to accept "AS IS". And what if the issues or defects are Health and Safety related?

The last couple of Home Inspections of REO properties the list agents wouldn't even ask the Banks for credits and my buyers walked. And for a fact the defects were not disclosed to the next buyer nor was there a price reduction.

I understand the REO list agents are trying to do the best job for the Bank by getting the most beans in the jar at COE but I think they are doing a disservice to the buyers, by not even asking the Bank for credits or disclosing defects to the next buyers. I am sure it must be nice to work M-F bankers hours while all the buyers agents do all the work for the same amount of comm. And this is not sour grapes but unethical practices, by the list agent!

Some of the under handed deals by the few that have the REO's have taken our Market to new levels of deceit. I now see standard sales listed "AS IS"! Nobody wants to be responsible for anything!! A Home Inspection should be lawfully required on all sales, no doubt BUYER BEWARE, rings so true today!!

 

 

I recommend that the buyer have a home inspection on Any Home they buy!!

Most balk at new construction, if they don't they will sign a disclosure

Article 2 of the NAR Code of Ethics states:

"REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction."

Based on your comments, it appears that this agent knew of a condition that affected the marketability of the property, and purposely and knowingly concealed it. Sounds like an ethics violation to me...

I think it would be fair if the LENDER produced a Home Inspection prior to the buyer getting one.  We are now being taught that it is to our benifit if we have the sellers do a pre-inspection so they can determine what may be wrong with the property prior to a sale.  This is a win-win situation for both as we all know all home inspectors are not alike.

Here in Florida we also have sink hole properties, Lenders do not need to disclose that either, however if you have a "seller" that may have had one, or there were or are ones around that home it "MUST" be disclosed!

As far as being ethical. well that's what gets us the "bad name" only second to car salesmen...I'm doing everything possible to assure my buyers gets a home inspection done or "BUYER BEWARE"

Inspect, inspect, and inspect ... but take look at the reports, how many times have you seen conclusive reports? Well, a typical termite report will say .... is beyond the scope ... is inaccessible, we will charge $XXX for further inspection when area is made accessible, .... we recommend further inspection by a specialty, etc. How much is your client willing to pay???

Todd,

I've also had this happen, as I'm sure many of the others before me. I was really hoping this market would weed out the 'less than ethical' agent...it seems to have created a whole nother group of the 'Anything goes to make a buck' crowd. These agents know better and it's up to other agents with ethical practice  to file charges with their local boards. If we keep turning a blind eye, then it will continue.

I once represented a buyer that placed an offer on an REO.  When we walked in it was clear the water heater was leaking and clearly rusting out the bottom of the tank.  I informed the agent and we asked for a credit specific to the water heater and damage of the wood pedastal.  The investor denied the credit and denied knowing anything about the issue.  After some lively discussions with the listing agent, we were able to have the credit approved.  Five days before closing, during the walkthrough, the water heater had busted and emptied 40 gallons of water into the den.  Now, all the carpet was moldy (must have happened a couple of weeks before close) and needed to be replaced.  The $800 water heater was now a $3000 dollar job. 

In my humble opinion, the listing agents are not doing their best to represent the seller's interest.  The logic behind fixing an obvious issue vs. the time of neogtiating back and forth as well as the risk of a more significant repair, simply does not make sense.  Not all REO agents are like this, but many are simply sliding by and afraid to consel their asset manager clients.

Todd - I'm with you 100% on this.  I always recommend inspections on home sales - but ESPECIALLY on bank owned properties and short-sales.  Somehow, I foresee a blizzard of litigation when the dust settles a bit.  Banks come and go, Sellers disappear. . .BUT real estate agents are here until the day we die:-( 

I think any agent that doesn't disclose and outright lies regarding material facts about a property is committing professional and possibly financial suicide.

Inspections? Yes!

Most banks when acquiring property through foreclosure are exempt from disclosure laws, this no doubt will vary by state.

Yes, Banks do have disclosures saying that the seller or agent makes no represenation - but that is in the beginning BEFORE an inspection and they find out something that will affect the material value of the property.

It is at least an Ethics violation for the agent not to disclose it and I think the courts would have an interesting time with a case that came out of a situation like this.  Even if the bank got away with it, would the agent?

Single Agency and Transactin Brokerage require us to disclose material facts that affect the value of the property. Can an agent get away with it if they have "No Representation"?

OMG! This is so TRUE! I just went through this!

This house was gorgeous! But, it was like Phyllis Diller, Barbara Walters and all those others who have had face lifts and yet their interior structure is falling apart.

We found a collapsing basement, MOLD galore ...........and even, on a rainy day during the inspection period....an inch of water on the dining room floor! $350 for this inspection and we're still waiting for a Mutual Release from the bank.

I will have to tell you that they KNEW this was all going on! Yet, the house remains on the market and even though I told them of the troubles........they don't have to disclose them to the next Buyer. SHAMEFUL!

All "as-is" means is that the banks will not assume responsibility for any defects if the buyers try to go after them, which often can be done with sellers IF you can prove they knew about defects.  It is designed to prevent future litigation. Inspection on a bank-owned? Why would you not do one, especially if it has been vacant for months?  As for any realtor who plays dumb about a defect they fully know about, it is unethical and that behavior just makes all realtors look bad.

Inspections are very important! I think banks should have to disclose defects, I also think that any health hazards or code violations should have to be repaired before selling a bank owned property. Some of the properties I have been in are falling apart and they are eye soars in neighborhoods.

I totally agree and I also want to say that Sharon brings up a very interesting point.   I am interested in what the rest of you have to say about "no representation and agent duties".

I've had it happen twice in my career so far. I had a buyer in a mutltiple offer situation on a bank owned property. None of the other buyer's knew about the problems a previous inspections uncovered, I only knew because someone in my office had a deal fall apart because of them. I asked the agent to see if her buyer would share the inspections and I faxed them all to the listing agent and told him that he was now aware of several material adverse defects and he would need to disclose them to all of the buyer's so it would be fair for everyone. The other house my buyers would have had no water, the well was bad and because city water was available could not be fixed. It was a $7000 fix, the bank tried the as-is game and we started to back out of deal, but not before I contacted the county to put a big orange tag on the front door telling the world there was no potable water supply to this home. Amazingly, the bank decided it was worth paying the $7000, my buyer ended up still buying. You have to be so careful, I am amazed that any buyer would not have their own agent on these very risky transactions. Good post.

The agent should tell since he or she knows the defect. The bank should tell if they it as well. They are most likley not put to the test often enough.

What would the listing agent do if the shoe were on the other foot? What would the bank do? They would hire an attorney of course.

That's terrible! I am sorry that your buyer had to lose that money, that is a tough thing! I appreciate all the Realtors that stick to the code of ethics and disclose material facts that they know about. I think I would be talking to the local board about how to get the listing agent to reimburse your client their lost money....

That listing agent's behavior would not just be unethical, it would be illegal in California.

In North Carolina a Broker is not relieved of his duty and thus would be in violation of licencing law if they did not disclose in fact they have a duty to the public to discover material facts. The banks are in essense shifting ALL liability tot the Listing and Selling agent. CAN YOU SEE THE LAWSUITS COMING IN THE NEXT 5 YEARS AS A RESULT OF ALL THE BANK OWNED PROPERTY BEING SOLD. LOOK OUT.

When ever you have to ask yourself whether or not to disclose something, ask yourself: If I was the buyer, would I want to know that material fact.....the answer is obvious.

Did any of you file a grievance? Does anyone have proof of hidden disclosures or prior reports? It is easy to accuse but difficult to prove. While I agree completely on your comments I am alarmed at all those who will jump up to make disparaging comments without facts or those who will never file a complaint.  We are a self policing group who are often afraid to take other agents to task as they may retaliate against us (not present our offers) in the future.  If they are violating the code of ethics and the law TURN THEM IN.  As a REALTOR I find that this is not only a right it is a responsibility to our fellow REALTORS and to the public.

Todd can you go back to the previous Buyers Agent and ask if they sent the listing agent a copy of the inspection report along with the cancelation? In Missouri this is required when canceling a contract due to inspections. F the listing agent received the inspection report Missouri law states the seller has to get a copy of that. The sellers HAVE to disclose all known defects regardless of who the seller is. Look up cases and see the verdicts on this issue. It is sad to see banks knowingly not disclose but I always have clients do inspection for their protection. Good Luck!

I don't understand why the banks are not required to get a home and pest inspecion prior to listing.  It would definatley help in the pricing of the property.

I have found nothing in the law in any state that would allow somone to lie.  In all 50 states this would be considered FRAUD.  Although in some states there is "protection" from having to disclose, the only way a seller or their agent can respond to a direct question is, "I am not obligated to disclose that information."  This statement can only be made if the law does not require disclosure.  Under no circumstance can they lie.

I would also direct your attention to two articles on this very subject, and while laws vari from state to state, the only time a REO seller is specifically released from disclosure at the Federal level is at the forclosure sale.  Once the property is in the banks name, unless there is specific rule or statute that allows non-disclosure, those sellers have the same obligation to disclose as any other seller.

Hope you enjoy the following.  Please let me know.

 

http://activerain.com/blogsview/1224626/disclosure-is-not-an-option-even-if-it-s-an-reo

http://activerain.com/blogsview/1261276/disclosure-is-not-an-option-even-for-reos-part-ii

Hercel Spears  www.Hercel.com  Advanced Realty Education  RE/MAX  Alliance Group, LLC

 

Having the dubious pleasure of living in one of the foreclosure capitals in the US, I can tell you the lenders could care less if the roof is falling in, all they want is a closed deal. No disclosures are offered, even when the agent is aware of something, they tend to plead ignorance..very frustrating. I must say, I am aware of agents that are listing homes without care concern for the buyer as it relates to items they are fully aware of. This market will change...the only thing constant is change.....when it does and these agents have to once again work for the business, many of us will remember the quality of service they gave. When working with buyers, I desire to work with a listing agent who is honest, not a schemer.  In the state of Florida, the agent is to disclose all "material facts that directly effect the (value) of the property" The challenge is to get the local MLS board in enforce the disclosure rules per the existing MLS guidelines. Your state Real Estate Commission may or may not make it difficult for you to file a complaint.

I always recommend inspection, new or old homes. The best $ money they can spend for their investment.

My question is how can the banks get away with this?  I did a BPO for a property in which the foreclosed homeowners intentionally left the water on and there was over 2 feet of water in the home, leading to a ton of damage and the potential for mold.  The bank had the walls painted to cover up the water stain and listed it as is.  In my BPO, I noted the standing water, the REO listing agent knew all about it, but it was listed as is.  In this case. the bank and the agent had material knowledge of a severe problem, but sold it as is.  How can this be?  Why is this allowed? 

When we encounter this type of thing, I feell we have an obligation to our colleagues to file a grievance with our board if such a process if available.  We're not out of this market for a while, and are apt to continue to deal with these types of challenges.  Agents representing REOs typically have a lot of them.  If they get their hand-slapped (or in some cases fined) they are less likely to continue the bad behavior.

This is a no brainer.  Some agents need to go to ethics school.

Todd, I insist my Buyers get a property inspection regardless of whether it is a brand new developemnt but especially in the case of a REO.  I fully agree that listing agent has a duty to disclose once a defect has been found - regardless of who found it.

Pat Norwine  12/7/09

PatriciaNorwine.com

Tom, I do agree with you that it is the moral duty of the Listing Agent to disclose the

material facts of the property to the third party.   If he does not, in my opinion, it is an

unethical behaviour on the part of the Agent   Anyhow, when the Inspection is ordered

by the buyer, he or she sure will know of the material facts in the property and may

alter their decision to buy the property.

Yes just because the seller is a "Bank" does not give them the right to not disclose what they know. I'm sure the REO listing agent's do their best to please the hand that feeds them and I understand why but rules are rules. If the DRE gets hold of that email I would not want to be in his shoes.

From my experiences with REO's they say "AS IS" but they will make repairs if it the lender requires it unless they have a all cash backup offer. Just be careful and read the Bank Addendum's and be sure to request within your contingency period.

Also be sure to apply for your loan before the date stated in the addendum's because they could use that against you if they wanted. I have first hand seen the banks do some sneaky stuff and they frame it to look like the buyers fault. The Asset manages sell hundreds of REO's and the know every trick in the book. Be careful and study those addendum's they take many of your rights away.

I could go on & on about REO's but I would drift off subject. Yes get your own inspection for your own protection.

Hi Todd,  Wow, intentionally withholding this info seems way over the line.  Did you report him to the board?

 

Todd - CJ (#76) brings up a very good point - TURN THEM IN! (for what good it will do).  I did that this year with an REO agent here in Ventura county.  I had proof that this REO agent and the REO bank seller she was representing were informed of the problems with a property that a client of mine tried to purchase. 

What was the proof?  I had copies of the bldg code violations that the city of Ventura had issued to both the REO listing agent as well as the REO bank seller - THREE MONTHS BEFORE MY CLIENT EVEN MADE AN OFFER.  When I confronted the REO listing agent with this documentation and asked why she didn't disclose these defects in the MLS listing as well as to my client when he made the offer, her response, "that's what as-is means".

For the record REO agents, listing a property "as-is" does not mean you violate your code of ethics and it also does not release you and/or your REO bank seller from disclosing defects about the property that you undeniably know to be true.  As for this REO listing agent and her REO bank seller?  I reported her to the MLS and all she got was a slap on the wrist and she and her run-down, dilapidated, dumpy REO's are still on the market and it is business as usual for her and her sleazy REO banks.

This can be a two way street for a listing agent - Obviously, if they are aware of a material defect, not just with the property, but with the title or the survey of something else, everywhere I know about requires that it be disclosed. If they don't, a quick trip to the state DRE will take care of that.

As far as a property inspections completed by a prior buyer, that document is generally regarded as the property of that buyer, and cannot be "given" to another buyer without permission of the first buyer. That doesn't preclude the listing agent from letting a new buyer know that, for instance, the furnace is broken or the range doesn't work.

I work almost exclusively as a REO listing agent, have for about 8 years. My policy is to disclose what I know or what I may have observed. Many communities now require some kind of municipal inspections prior to a sale. I order the inspections when the property is first listed and upload those results to the MLS as soon as I have them. But at the same time, I don't go looking for items that may be deficient. I'm not a home inspector and have no knowledge that would make me qualified to comment on inspection issues.

 

 

Stop the madness! I never relied on disclosures before, why is it more important now? Sellers are mostly reluctant, absent-minded or just evil.

Your "Decline-to-Inspect" form does not make construction defects go away, nor does it fully protect you from litigation. Selling agents: You should pay for the home inspection to protect yourself. I consider myself fortunate to get referrals from some great Realtors and I would be flattered to come to the rescue. I would discount the home inspection (and once charged only a dollar) to protect that real estate agent. I bet I'm not the only home inspector to do this.

Curious..   Seems like the agent didn't follow Article 1 of our code of ethics:                                                                                                                                                                                                Duties to Clients and Customers

Article 1
When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS^® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS^® of their obligation to treat all parties honestly

Excellent post Todd! As a home inspector, I often see bank-owned homes which have been vandalized in ways that are not seen by the agents and buyers. A recent example in Sacramento showed that the previous owner poured mortar into several drains/traps. This only evidenced itself after running the water for 10-15 minutes. Another homeowner loosened the neutral wires in the electrical panel, causing them to start to melt. Without a home inspection, these issues would have been sure to surface quickly, right after COE.

Rick Hartmann, Home Inspection Plus

Lincoln, CA

In your place I'd contact the agent that sent you the warning email (the one that had the sale fall out),  Ask them to send the inspection report to the listing broker, with tracking.  Save the delivery confirmation.  If you really want to "help" the listing agent do the right thing, send a copy of the inspection to their managing broker too.

Now if a problem occurs, while the bank may be able to use the agent as a screen, the agent and their company may well be liable for damages for the non-disclosure.

I've handled REO's in Oregon before (admittedly it's a different climate now) but the banks I worked with weren't interested in hiding the problems.  I think that you are right and this is a agent/broker thing, trying to maintain an ongoing flow if REO listings.

If the first agent, who's buyer got the inspection, forwarded the listing agent I too would submit a ethics complaint.  It the problem continues with the managing brokers knowledge OREA should get involved.

As a matter of practice, I would forward inspection reports on any transaction that my buyers couldn't/wouldn't complete because of needed repairs.  I did this during the negotiations (if necessary) with the buyers permission.  The logic being that the next buyer would be know of the problems before making an offer.

It is crazy that an agent would risk losing their reputation, let along their license to get a deal closed!

A seller's agent must disclose all material facts, regardless of when they are discovered and even if the information may adversely affect the completion of the sale. The facts must be disclosed even if the seller does not agree to the disclosure and instructs the agent not to disclose.

Many states have a checklist form that is completed by the seller, with the agent's help, that: (1) states that items checked have been inspected by the seller; (2) states that the seller is not aware of any items that are not in working condition, or a description of items that are not in working condition; and (3) contains an itemization of known defects or malfunctions in the structure and a description of the defect.

A seller's agent who has actual or constructive knowledge of defects may be liable to a buyer. The buyer may obtain relief through arbitration or mediation, if the contract contains an arbitration or mediation clause, or by filing a civil lawsuit against the seller, the agent, the broker, or any combination, depending on who failed to disclose material facts or hidden defects.

Banks and asset managers are wrong on this issue many times.  Just because you are exempt from completing a particular form does not mean that you do not have to disclose what you actually know about a property.  That goes double for their agents who many times are the only ones who know the history of the property since it was taken back and possibly repaired etc.  The bank may not know that the road behind the house is noisy and the landscaping drains the wrong way, but they do know that they sent someone in to remediate mold before they put the property on the market.  If they (and their agent) don't disclose that -- they are fools.  Just as the chickens have come home to roost on funny money loans, they will come back on the way the first wave of foreclosures were handled by the banks.  In some cases, they instructed their agents not to disclose anything, and some agents actually followed their instructions!

Tni LeBlanc, JD, MA, e-PRO

As for a home inspection...."Dont leave home without it". Inpsections are a must! As for known material facts it's simple, When in doubt, DISCLOSE!!!. Courtroom judges are not fond of big secrets when it comes to real estate. I sell REO properties for banks and they DO want to know about issues and they are expected to be disclosed. $400-$600.00 now to save thousands in defense/repairs later just does not make sense. 9 times out of 10 even if you disclose something "small or minor" the buyer will still purchase the property. Buuuuut.... dont disclose and you just gave them a license to drag you to court one day (when their coffee and donuts were sour) over an issue they would have originally never cared about just because someone told them they could. You'd be amazed out there. DO THE RIGHT THING.

Todd,

Great post and way to "raise" the level of awareness about agents that still don't understand the word "fiduciary"! Unfortunately, the same agents that played games in the past are still the ones doing it in this market. But, they can now blame the bank and few people know to challenge that line of BS.

What should be happening is the agent representing the (short sale) seller should be forwarding the problematic circumstances to the bank. The bank in most cases will "offset" the repair costs to the prospective owner. The asset manager knows that somewhere along the line, someone is going to need to handle the problem and once the property is bank owned it just costs them more money in the long run.

We just closed several transactions with IndyMac and they are great to work with. Here in Orange County, CA we have termite and soil issues on a regular basis. Once they we notified of the problem, we received a reduction equal the repair estimates. One asset manager said, "it's only going to get worse if we don't handle it now"!

With all the banks getting taken over by the FDIC, I think we'll see the acquiring banks more willing to deal with the "reality" of repairs and damage issues moving forward.  

Here in CA the banks don't have to disclose either. I recently purchased a bank owned property from IndyMac and knew that they wouldn't be obligated to disclose anything. The tricky part is that once a bank accepts your offer, they hardly give any time to arrange inspections. So you have to decide before you even know if your offer is accepted if you want to spend the $300- $400 to get the inspection done. Since the property I was purchasing was fairly new, I wasn't too worried about any major issues, but did get the inspection any way. Fortunately my offer was accepted so I wasn't out the money for know reason.

It's too bad there are people out there who thinks it's ok to be unethical.

If it were me I would file a complaint with the Board and your real estate commission. That agent needs to have their license taken away. I agree that they often think the rules don't apply to them.

Good post. I advise my clients right up front that an inspection is in their favor. It's more than an escape route, it's to their benefit.

If there is a duty to disclose in your state, you should report that agent. 

This profession needs to take itself seriously and clean up or clean out the dirt balls. 

Always get an inspection.  Technically you cannot do an "as is" sale in California as you can do the inspection and then negotiate if you find issues.  I take "as is" to mean the bank has no intention of doing anything to fix anything, but sometimes they do.

Although the lender is not required to fill out the statutory form for disclosure, I do not think that the exclusion from that requirement also allows either the lender or the broker to fail to disclose known material defects in the property.

If you are dealing with an agent who is refusing to disclose known material defects in a property, then I agree with previous posters that you should report them to the Oregon RE agency.

If you represent a buyer who has been injured by a broker's refusal/failure to disclose known material defects in a property, you should be sending that buyer to an attorney to analyze whether they have a claim against the seller, broker or both.

(I'm an attorney now, but in the previouse "recession" in the 1980's I was a real estate broker specializing in representing lenders in the sale of their foreclosed properties)

Although the lender is not required to fill out the statutory form for disclosure, I do not think that the exclusion from that requirement also allows either the lender or the broker to fail to disclose known material defects in the property.

If you are dealing with an agent who is refusing to disclose known material defects in a property, then I agree with previous posters that you should report them to the Oregon RE agency.

If you represent a buyer who has been injured by a broker's refusal/failure to disclose known material defects in a property, you should be sending that buyer to an attorney to analyze whether they have a claim against the seller, broker or both.

(I'm an attorney now, but in the previouse "recession" in the 1980's I was a real estate broker specializing in representing lenders in the sale of their foreclosed properties)

"should a listing agent that now knows a material fact about a property be required to share that information with a potential buyer, especially if they are asked directly about that item?"

YES YES and YES and in SC its grounds for disciplinary action.

I find it very annoying when I step into a home and can smell (in spades) the mildew/mold.  For some reason too many agents/brokers are not mentioning the mold in their remarks about the home.  At some point we are going to slapped with a lawsuit for not disclosing the issue; someone is going to become very ill and there will be repercussions.  As to material facts not being disclosed because of seller instructions, that is a lame excuse here in Virginia.  If your seller instructs you not to disclose FIRE THEM!

Great post, Todd. I'm in full agreement with Weichert (post #39 above) We have to be ever vigilant.

Great post, Todd. I'm in full agreement with Weichert (post #39 above) We have to be ever vigilant.

This seems to happen alot with REOs.  I had the same thing happen on a property with flooding issues.  The listing agent wouldn't say a thing about it even though the property had been through a couple of failed escrows and mold remediation.  They said they didn't have copies of previous inspections and didn't know where the problem was coming from.  Yeah, right!  ALWAYS GET INSPECTIONS!!!

IF the listing agent knows a material fact, he can be sued and lose his license for not disclosing that on their AVID once that fact is made known to them.  WHat that agent did is illegal and should be turned in before they do it to someone else and drag down the reputation of other Realtors and agents.

Todd, totally agree and I just had an REO have to go 203K just because of this stuff.  The listing agent knew enough of the hidden items & did not disclose anything becase 'she didn't have too'.  It is just not right and should be stopped.  If the LA knows of the defect from a previous inspection then it should be mentioned to all buyers down the line just like a regular sale.

Todd great post!

So many great points have been raised here.

I've worked both as an REO listing agent and REO selling agent, as well as a former REO asset manager prior to doing sales, and I can tell you that a material adverse fact does not change colors no matter what side of the transaction you are involved in. 

Although most REO sellers may be exempt from providing a condition report which would normally disclose defects or material adverse facts that the seller may be aware of because they've never lived in or occupied the property and are out-of-state owners.  However, under Wisconsin law, licensees have a responsibility to disclose information relative to the transaction concerning material adverse facts or conditions that they may be aware of or have observed during the property visual inspection. The problem may arise with listing agents who are handling high volumes or doing bulk REOs and do not personally, visually inspect each and every one of their REO assets so they may never know what's truly going on with all of their listings.  Even though they have good valuation teams with great bpo/photo experts, the pictures cannot tell you everything about a property and sometimes they may rely too heavily on the pictures to do a bpo without ever going inside the property.   When I had 100 + REOs, I personally inspected each listing because I wanted to know what was going on and at least have a feel for the property in case the REO client had questions I wanted to seem somewhat knowledgable about my own listings. Even if I hired someone to take pictures, I would make a point of getting over there to just see for myself in case the photographer may have missed something or I needed more detail for the bpo.

Wisconsin administrative law (RL 24) also states that "the duty to disclose supersedes the licensee's duty of confidentiality to [his/her] client", even if the seller requests not to disclose. 

According to Wisconsin law, a material adverse fact is defined as:

An adverse fact means a condition or occurrence that is generally recognized by a competent licensee as doing any of the following:

1. Significantly and adversely affecting the value of the property;

2. Significantly reducing the structural integrity of improvements to real estate; or,

3. Presenting a significant health risk to occupants of the property.

As a listing agent, it's easy to say I don't know, I'm not aware, the property is sold "as-is/where-is/buyer beware".  The goal is to sell as quickly as possible, to move these nonperforming assets quickly and get them off the books asap.  But as a selling agent, there's a human being in front of you, not just an email or an internet/website upload.  In that case, I always recommend that my buyers invest in an inspection so they know what they're getting into because there are no representations or warranties from the bank, what you see is what you get, and once it closes there's no turning back!  So it's important that selling agents and co-brokes coach their buyers through this process to avoid unnecessary mishaps and mitigate any extenuating circumstances.

In addition, it's not that asset managers don't care or lack ethics, often times they are overworked/underpaid employees handling 300-500+ files and just trying to get as many files closed and off their desk as possible and meet the quota so they can earn a paycheck at the end of the day. They are, for the most part, hardworking individuals who take their jobs very seriously but do not have the luxury of time to deal with or even know all of the intimate intricacies about each state.  They may be handling several states and rely on their agents and brokers to manage those assets and keep them out of litigation and keep the files moving and sold!

As with any group, whether we're talking about Realtors, Asset Managers, Banks, etc., there's always good and bad, sometimes a few bad ones can make the whole bunch look bad, but it's up to the good ones to outweigh the bad and maintain a level of integrity, trust and honesty.

Great post and interesting discussion as well. Yes, a listing agent has a duty to the seller, but isn't part of that duty to keep them out of lawsuits.

I know - the banks sell as-is and claim to have no duty to reveal known defects. But a court of law might decide differently if the buyer could prove that the bank or the bank's representative DID indeed know of a serious defect.

Banks seem to feel above all State real estate laws - and I don't believe "ethics" is a word that is even allowed into their vocabularies.

I agree with Ed - if your client wants you to behave in an illegal / unethical manner - fire them. The money isn't enough to pay for losing your own self-respect.

This is pretty typical of public and private remarks in NE Fla........

"Remarks: Seller is selling in 'As-Is' condition & will make no repairs. 5 days inspections max. Seller & agent make no representations or guarantees. Seller or agent has no knowledge of any defects that would affect value of property. Buyer must verify all info including but not limited to HOA fees and TAXES. Seller will not pay for or provide survey.
Private Remarks: PROOF OF FUNDS OR PRE-APPROVAL LETTER from **LENDER**, AS IS/NEFAR OFFER FORM, AND COPY OF BINDER CHECK REQUIRED WITH ALL OFFERS (NO EXCEPTIONS). BUYER WILL BE REQUIRED TO SIGN SELLER'S ADDENDUM UPON ACCEPTED OFFER. COMMISSIONS IS AS PER LISTING UNLESS STATED OTHERWISE BY SELLER ON CLOSING INSTRUCTIONS TO CLOSER"

Good luck contacting the listing agent! When you do, in a many cases they have never even viewed the property.

It is a loop hole, REO transactions are more like a commercial sale, were there is little if any disclosure and it is up to the buyer to complete due diligence.

AS-IS means only that the seller will not make any repairs. It does not mean they are released from disclosing anything they know about the property. This means any type of seller: REO, individual, trustee sale, estate sale, heirs to property, etc.

I had to remind them ofter of this fact. They kept repeating the as-is mantra, but when I pointed out to them the CA RE law, they sometimes woke up and smelled the roses.

Kim (#117) I laugh when they put that in the listing. I humbly (well, maybe not so humbly) remind the listing agent that their disclaimer doesn't work in a court of law. They must disclose anything they know about the property, even if the bank never occupied it. The listing agent has visited the property and they can see the obvious problems. Many say "Buyer to verify sq.ft., schools, etc." I ask them what the hell are they getting paid for? It's their job to verify these things.

My broker keeps reminding us that if you are in doubt, disclose!

Always recomend an inspection on a purchase on everything but especially if it looks like a bargin there could be a reason.

Thank you

Hi Tood,

Good question.  The listing agent does have to disclose those known items and I believe there have been law suits where previous inspections were not disclosed.  This would potentially save other buyers the cost of that inspection fee and wasted time on everyone's part.  Currently in CA, the banks are exempt from much of the TDS because they don't know the answers to many of the questions not having lived in the home.

As far as a buyer goes, they should always have both a pest and a home inspection done.  Though they are buying the home "as is", I tell my buyers they still need to know what that is.

Thanks for your post!

Great post. A home inspection is a must buying a bank owned home. If your buyers do not want a home inspection, get it in writing to protect yourself down the road.

Boulder City Steve

i have this discussion with agents all the time.  many think that because their sellers are exempt from delivering a Transfer Disclosure Statement they are exempt from disclosure.  many honestly believe this.  many are just plain wrong.  the good news is that while the lenders/owners may be hard to sue,  the agents are right here in town and ALSO have disclosure obligations. 

i see many possible suits in  the years ahead for willful failure to disclose known flaws.  and it's the listing agents that will get  the worst smackdown as they are the most accessible.

i have decided that  the banks heavy handed counteroffers, cagey business practices and one sided contracts are simply too dangerous for all but my most sophisticated clients to risk dealing with.

sonia, #115, you are not  the common operator and if your practice was followed we would not be having this conversation.

allison, #83, i am with you.  if the agents are concealing known defects they need to be called to account.

 

Featured again in Bob's weekly digest of AR articles. You ROCK.

Inspect, of course. But let's not mislead buyers about what inspectors do and don't find.  One comment above said, "only to find surprises within the walls," but an inspection doesn't see inside walls.

It seems to me that your MLS Code of Ethics would govern the listing agent's conduct.  In addition to this issue, we've had a local agent say that her client, the Bank, does not want their properties pended until the closing.  Since when does a client, bank or other, dictate our MLS policies?  Furthermore, our county code requires a septic inspection certificate, if an inspection hasn't been done three years prior to closing.  The banks are exempt!!  Many of the foreclosed properties have been trashed/vandalized and are in dire need of a septic inspection, along with the other inspections.  Again, why are the banks exempt?  Not right, not fair.

Tod

As far as the Listing agent, YES they MUST disclose any info if directly asked.  As far as the banks go, you need to direct this question to RESPA and see what they say.  I agree with you, the banks can no longer claim not haveing knowledge, if a sale fell through for a problem found on an inspection

Lastly, in ANY state, I have fund there is no such thing as "AS IS"  I have learned to AWAYS ask for the repairs and have gotten them done by the banks a few times.

 

 

Inspect, Inspect, Inspect!   Good REO agents in our area are disclosing all they know from the start.  They don't need or want the practice of submitting offers that don't make it to the finish line. 

I've been told that several banks/assest managers are shredding failed escrow files and thus they have no inspection reports from previous escrows.  If an REO listing has changed listing agents several times,  be forewarned that there is a reason why!

Code of Ethics Article 2

REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law. (Amended 1/00)

What are the laws in your state and what kind of agency does she have with the seller?

  

Code of Ethics Article 2

REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law. (Amended 1/00)

What are the laws in your state and what kind of agency does she have with the seller?

  

In Tx - if you do not recommend an inspection and the buyer later finds material defects the agent may find themselves in court.  Practicing real estate is an exercise in CYA - oh - and don't recommend an inspector - send the buyer a list to choose from.

Gary

Most of these issues can be addressed right off the start if the house were to have a home and a pest control inspection reports prior to putting it on the market, it will help everybody, buyer, seller, listing and selling brokers. It does not cost as much as you think.

 

Antonio

Todd - To answer your question, yes, I do believe that a listing agent who discovers material fact about a property be required to share that information with a potential buyer, particularly if asked directly about that item.  I find it a breach of ethics otherwise. 

 

 

There are red flags every where in this situation.  Many agent tend to align with the banks and their arrogance.  Not too smart.

Todd IMO I believe the next big upheaval in real state should/could be a class action lawsuit againts the lender-seller and their REO agents. I too believe buyers are being taking an unfair advantage of.  REO properties should have a pre-inspection paid for by the lender and then given to the buyers for fair disclosure.  I predict the industry will be forced to mend its ways in many area and inspections may be one of them.

In CT, agents are required to disclose known material facts about a property. Otherwise, we would stand in jeopardy of losing our licences. Is it worth it? Not in my book it isn't. Tchaka took the words right out of my mouth. 

Who in their right  mind would not get a home inspection today --  especially with all the foreclosers and shorts happening. I would twist my clients's arm to get one ---- good contributions everyone...   thanks

Isn't it the listing agent's duty to reveal material facts know to him/her? It's amazing that an agent would not do this!

#91@ Joe: As a listing agent and a fiduciary to the seller it is not in my client's interest to inspect and require him to share the results of that report with every buyer, which is what is required under Texas law.  That would expose me to a potemially huge liability.

Stop the madness! I never relied on disclosures before, why is it more important now? Sellers are mostly reluctant, absent-minded or just evil. Your "Decline-to-Inspect" form does not make construction defects go away, nor does it fully protect you from litigation. Selling agents: You should pay for the home inspection to protect yourself. I consider myself fortunate to get referrals from some great Realtors and I would be flattered to come to the rescue. I would discount the home inspection (and once charged only a dollar) to protect that real estate agent. I bet I'm not the only home inspector to do this.

Todd you have hit on something even more disturbing. The banks do not play by the same rules that we do. Until they are made to conform to a professional and fair way of disposing of their problem properties we will always have to be on alert. We need to have all banks doing foreclosure properties  steamline the process and have guidelines that are fair to us and to the buyer. I think that when this finally settles down we will see some litigation from deceived buyers and agents!

I've had one cash buyer who bought two REO 4-plexes from me a few months ago. He was a contractor and he didn't care about the condition of the property. That's why he got a fantastic deal on both.

One actually had a major roof leak and destroyed the top two floors due to flooding and the city of San Jose red-tagged it. He bought both as-is and to CYA, our office has a form listing all the specific inspections that are to be done. There are 22 items listed (roof, chimney, foundation, heating system, etc.) and he initialed every one as to not have an inspection.

I took pictures of all the rooms (over 70) and kept it in the transaction file. If he ever comes back that we didn't disclose something, we're covered. Sometimes you can only do so much.

I have never had a Buyer BUY without getting an inspection?  Why would they?  It just doesn't make sense. ~ JC

I absolutely unequivocally agree that any known material fact must be disclosed and if not the bank should be held liable for non-disclosure. They should not be permitted to have an exemption to material facts. Bottom line - that's wrong.

This is not a "Should your buyers inspect" issue. We all know as proffesionals that we are to protect our customers buying strongly suggesting a thorough home inspection. This just is not the issue of this post.

The issue is the REO "Gods" that are allowing the banks (seller) to dictate what they can disclose. For most of this would never fly with a typical seller/broker transaction. Why is it being allowed by brokers just because they are dealing with banks? For money? How long would it take for you to fire a "seller" that took 30 days or more sometimes to respond in writing to an offer? Would you keep a seller that told you not to disclose something you know that materially affects a property?

I know we will be seeing many foreclosures for the next couple of years but when the market stabalizes and we are back to "normal" transactions I will the remember the ones that did not play by the rules.

Oh yes,  I am making a list and checking it twice!

Todd,

I'm not sure that "as is" is really "as is"!!!  I once bought a property at a foreclosure auction.  When I had originnally viewed the property, it was great!  Right before the auction, I went to relook at the property, and the key had been broken off in the lock and I couldn't get in.  ( Apparently, the perspective Buyer's dad made sure no one else could preview the property!!!)  I was the high bidder at the auction.  However, after the lock was replaced, it was discovered that the previous owner had visited (not sure how he got in!), removed some furniture, put holes in the wall, gouged holes in the vinyl floor and the heat/AC no longer worked!

Before settlement, I took pictures and showed the damage that had not been there on my previewing to HUD.  They sent 2 repair men.  The heating man did a great job; the drywall/floor man was a slob!  So I again took pictures and went to settlement.  AT settlement, I showed pix of the poor workmanship!  Hud again sent out a handyman who did a great job!

So... "as is" is not always "as is"!   ASK, ASK,ASK!!!!

I am not sure of Oregon Law, but it would seem to me that regardless of whether the bank is required to disclose known material defects, the listing agent, once they know of these things, must. Never the less, we always strongly advise buyers to get their own inspections done, and to never waive inspections... it is a hard world out there, and protection should be a no brainer when it comes to things like this...

Good evening everyone,

Thank you for all the wonderful comments and I agree these agents and the banks they represent should be held to the same standards as regular sale. This is just another reason why banks shouldn't allowed to be in real estate. They clearly don't have the publics best interest in mind.

Wow.  We do mostly REO's and if we know about something we disclose it.  Sometimes in the MLS, sometimes in the AVID, depends on when we find out about it. We had a house with a porch below street level.  There were proper drains but naturally the former owner didn't do the maintenance and the drains were clogged.  When the water gathered it ran into the house and flooded a downstairs bedroom.  We had it fixed (it stormed and occurred while the property was on the market) and disclosed not only the repair but the fix in the AVID.  Anything less would be unethical.  I could see it going bad and our files and emails with the AM being subpoenaed, and then what?

Sold as-is can make an ass out of you and me. Always do due diligence. It will never steer you wrong.

to answer your question...ABSOLUTLY the listing agent has to disclose that information...some sellers get by with not filling out a sellers disclosure by stating the listing is a investoment and they we never in the house...but if something comes up the the agent knows will stop a mortgage from going through, why not bring it up in the beginning