QUESTION: I am representing a Buyer who just got into contract to buy a Property. We saw the Property multiple times before writing up the offer because the Seller allowed in-person showings (even though that may not have been permissible under the local Shelter-in-Place Order). Neither the Seller nor the Seller’s Agent object to my entering the Property to conduct my visual inspection and I have no concerns about being sick. Do I still need to do an AVID? Can’t I just put something on the AVID to state that I was not able to do an inspection due to COVID-19? Can we do an Addendum to the Purchase Agreement to have Buyer and Seller waive the AVID?
ANSWER: Agents still have a statutory duty to inspect and disclose; that law has not been repealed, modified or in any way changed as a result of the COVID-19 pandemic. The ability for an Agent to complete an AVID form depends upon the specific facts of the transaction. There is NO “standard phrase” that can be added to an AVID form which will completely excuse the Agent from completing their statutory and fiduciary duties; and there is NO language that can be added to a Purchase Agreement to waive the Agents’ statutory and fiduciary duties.
I. BACKGROUND: Unlike contingencies and contractual obligations specified in a Residential Purchase Agreement, statutory duties cannot be waived. For example, unless the Seller is exempt from the TDS process, the Seller’s statutory obligation to fully complete and sign the TDS and the Buyer’s right to receive that disclosure form cannot be waived by the Parties
See Weekly Practice Tip: Potential Risks of Non-MLS Member Listings That Require Buyers To Waive the Right to a TDS (Dated 02/21/20)
An Agent’s duty to conduct a competent, diligent visual inspection of residential property (1-4 units) is also a statutory duty that the Parties cannot agree to waive.
After the federal government recognized that real estate was an essential business, CAR revised its Guidelines on March 31, 2020 to state that even during the statewide Shelter in Place (“SiP”), Agents are allowed to conduct their property inspections. However, stricter local Orders may still be in place which might prevent Agents from conducting their inspections and/or Sellers may refuse to allow Agents into the Property due to the Seller’s concerns about COVID-19. Under these limited circumstances, Agents may be able to claim that they were prevented from fully meeting their statutory obligations and thus, the inability to fully perform that inspection/ disclosure duty may be legally excused but only in that particular transaction. The Agents must still disclose what they know.
Some prior attempts to create a simplistic, one-size-fits-all, pro forma statement that is to be added to a blank AVID form regarding COVID-19 should not be used since the addition of that type of statement may prove that the Agent breached not only their statutory duty but other duties as well. Agents who have been visiting the property and conducting business “as usual” regardless of any SiP should not attempt to use COVID-19 as an excuse to avoid conducting their statutory duties to inspect and disclose.
II. HANDLING SPECIFIC FACT SCENARIOS: The set of facts detailed in the question are that the Agents have been to the Property at least once and the Seller has not objected to either Agent conducting their visual inspection of the Property. Under this set of facts, both Agents should inspect the Property and make full and complete disclosure of the results of their visual inspections; no effort should be made to include any language regarding the SiP.
However, when there are other facts, such as: (a) Sellers refusing to allow anyone to access the Property while there is a restrictive Shelter-in-Place Order issued; (b) the Buyer’s Agent has never seen the Property except through the online virtual tour process; or (c) an Agent is incapacitated due to COVID-19, then the traditional means of handling the AVID needs to be altered to fit the specific situation.
Attached to this Weekly Practice Tip are 4 different SCENARIOS which provide separate language for each Agent depending upon the facts. The practical steps as to what each Agent should do are more expansive than CAR’s “Quick Guide: Guidance on Visual Inspection Disclosures revised on March 30, 2020.”
Also attached is an AGENT STATEMENT form that should be added to the AVID so that the Agent has sufficient space to detail any constraints that prevented the Agent from more fully completing the visual inspection and disclosure process. Even the language supplied by CAR does not fit onto the AVID form.
PRACTICE TIPS:
- During the current COVID-19 pandemic, make certain that you are acting in compliance with any local, restrictive Shelter-in-Place Orders and that you are following all CDC guidelines regarding social distancing and hand washing.
- The process of completing the Agent’s Visual Inspection duty must be done as thoroughly and as reasonably as possible under the specific circumstances of the transaction, even if it is done “virtually.”
- Even if an Agent is not allowed access into the residence, if the exterior aspects of the Property can be accessed, then the Agent should inspect those portions of the Property and disclose the results of that inspection.
- If there are any actual impediments to conducting a competent, diligent visual inspection of the Property, then before preparing the AVID form, check the attached SCENARIOS to find the situation that best meets the circumstances of your transaction; then follow the recommendations for that SCENARIO. If you cannot find a comparable SCENARIO, then consult with your Broker or Manager.
- If you intend to use any type of disclaimer language in the AVID regarding constraints on completing the Agent’s inspection and disclosure duties, then in the “Other” section of the AVID form, you should state: “See attached Agent Statement.” Insert the disclaimer language into that Agent Statement (after tailoring it for the specific transaction) and then attach the Agent Statement to the AVID form.
This Weekly Practice Tip is an attorney-client privileged document for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2020 04/03/20
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AGENT STATEMENT
(TO BE ATTACHED TO AGENT’S AVID)
Insert the disclaimer language HERE (after tailoring it for the specific transaction)
and then attach the Agent Statement to the AVID form.
Real Estate Broker completing this Disclosure: ______________________________
By ________________________________________ Date_________________
(Signature of Agent completing this Disclosure)
I/we acknowledge that I/we read, understand and received a copy of this Agent Statement attached to the Agent’s AVID.
SELLER: _______________________________ Date_________________
SELLER: _______________________________ Date_________________
BUYER: ________________________________ Date_________________
BUYER: ________________________________ Date_________________
SELLER’S AGENT: _______________________ Date_________________
BUYER’S AGENT: ________________________ Date_________________
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SCENARIO #1 – SELLER PROHIBITS BOTH AGENTS FROM ENTERING THE PROPERTY TO COMPLETE THEIR AVID
The Seller’s Agent has been to the Property more than once prior to implementation of the applicable SiP but not after the SiP; the Seller’s Agent has not yet completed the AVID form. The Seller and Buyer have entered into a Purchase Agreement that states: “Due to Seller’s concerns re COVID-19, no one may enter the Property for any purpose prior to COE regardless of the date that the applicable SiP is lifted.” Buyer’s Agent has not seen the Property; Buyer has only seen online videos and/or photographs.
- The Seller’s Agent should complete the AVID form by making disclosures of all known “red flags” based upon information obtained from that Agent’s prior visit(s) to the Property. To explain the basis for those disclosures, the Agent should state in the “Other” section of the AVID: See attached Agent Statement. Use Agent Statement form attached to this Tip; Seller’s Agent would then insert the following language into that Statement after filling in the blank line:
Seller’s Agent visited the Property but has been prevented by the Seller and local Shelter-in-Place Order from re-entering the Property for any purpose prior to the Close of Escrow. The disclosures contained in this Agent Visual Inspection Disclosure are based upon the Seller’s Agent’s recollection of the Property from the prior visit(s) on: [insert known dates or approximate dates] . Buyer should carefully review all prior Seller disclosures and reports.
- If, in addition to the prior visit(s) to the Property, the Seller’s Agent has access to photographs and/or videos of the Property, the Agent should carefully review that material to refresh the Agent’s recollections about the Property and then attach copies of the photographs and/or videos to the AVID. The “Other” section of the AVID should state: See attached Agent Statement.and videos/ photographs. Use Agent Statement form attached to this Tip; Seller’s Agent would then insert the following language into that Statement after filling in the blank lines:
Seller’s Agent visited the Property but has been prevented by the Seller and local Shelter-in -Place Order from re-entering the Property for any purpose prior to the Close of Escrow. The disclosures contained in this Agent Visual Inspection Disclosure are based upon the Seller’s Agent’s recollection of the Property from those prior visit(s) ) on [insert known dates or approximate dates] and/or a review of the attached [specify number of attachments] photographs/videos which were taken by [insert source] that were taken on [insert date(s) if known otherwise indicate on unknown date]. Buyer should carefully review all prior Seller disclosures and reports.
- Under the described set of circumstances, the Buyer is acquiring the Property “sight-unseen” and should receive the Buyer Advisory Regarding Buying Property “Sight-Unseen.”
See Weekly Practice Tip: Buyer Choosing to Buy Property “Sight-Unseen” (Dated 03/27/20)
- Since the Buyer’s Agent has been completely prevented from conducting any inspection of the Property due to the terms of the Purchase Agreement, the Buyer’s Agent should review the online videos and photographs and, based upon that material, complete the AVID form by disclosing any known “red flags.” To explain the basis for those disclosures, the Agent should state in the Other Section of the AVID: “See attached Agent Statement.and videos/ photographs.” The Buyer’s Agent would then use the Agent Statement form attached to this Tip and insert the following language into that Statement after filling in the blank line:
Buyer’s Agent did visit the Property prior to the implementation of any applicable Shelter-in-Place Order and has been prevented by the Seller from entering the Property for any purpose prior to the Close of Escrow. The disclosures contained in this Agent Visual Inspection Disclosure are based upon the Buyer’s Agent’s review of the attached [specify number of attachments] photographs/videos which were obtained online and/or from the Seller’s Agent. Buyer should carefully review all prior Seller disclosures and reports as well as the Buyer Advisory Regarding Buying Property “Sight-Unseen”; Buyer should also consult with a qualified California real estate attorney regarding Buyer’s rights, duties and obligations in view of the Seller’s refusal to allow access for the Buyer’s Agent’s visual inspection.
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SCENARIO #2 – SELLER’S AGENT HAS COMPLETED AN AVID; SELLER WILL NOT ALLOW BUYER’S AGENT TO ENTER IN ORDER TO COMPLETE AVID
Seller’s Agent was able to complete the AVID; the Buyer’s Agent had visited the Property after implementation of the SiP but only to quickly show the Property to the Buyers. The Parties enter into a Purchase Contract in which Buyer accepts all existing reports and has no investigation contingency and no access rights. The Seller’s Agent then calls Buyer’s Agent and states that Seller will not allow Buyer and/or Buyer’s Agent into the Property for any purpose.
- The Buyer’s Agent should first send a written request to the Seller’s Agent for a written statement from the Seller confirming that the Seller will not allow Buyer and/or the Buyer’s Agent into the Property for any purpose and to also request that the Seller state Seller’s reasons.
- If the Buyer’s Agent is not allowed to have access to the Property, then the Buyer’s Agent should request that, if there are no existing photographs or videos of the Property online, that the Seller and Seller’s Agent consider creating a virtual tour of the Property for the benefit of the Buyer and the Buyer’s Agent.
- If the Buyer’s Agent is not allowed to have access to the Property and there are no photographs or virtual tours available from any source, then the Buyer’s Agent should complete the AVID form by making disclosures of “red flags” that are based upon information obtained from that Agent’s prior visit(s) to the Property. The “Other” section of the AVID should state: “See attached Agent ” Use the Agent Statement attached to this Tip. The Buyer’s Agent would then insert the following language into that Statement after filling in the blank line:
Buyer’s Agent visited the Property prior to the Parties entering into the Purchase Agreement. Seller is preventing Buyer’s Agent from entering the Property for any purpose prior to the Close of Escrow. The disclosures contained in this Agent Visual Inspection Disclosure are based upon the Buyer’s Agent’s recollection of the Property from the prior visit(s) on [insert known dates or approximate dates] . Buyer should carefully review all prior disclosures and reports. Buyer should also consult with a qualified California real estate attorney regarding Buyer’s rights, duties and obligations in view of the Seller’s refusal to allow access for the Buyer’s Agent’s visual inspection.
- If the Buyer’s Agent is not allowed to have access to the Property but there are photographs or a virtual tour available from any source, the Agent should review that material to refresh the Agent’s recollections about the Property and then attach copies of the photographs and/or videos to the AVID. The “Other” section of the AVID should state: “See attached Agent Statement and videos/ photographs.” The Buyer’s Agent would then insert the following language into that Statement after filling in the blank lines:
Buyer’s Agent visited the Property prior to the Parties entering into the Purchase Agreement. Seller is preventing Buyer’s Agent from entering the Property for any purpose prior to the Close of Escrow. The disclosures contained in this Agent Visual Inspection Disclosure are based upon the Buyer’s Agent’s recollection of the Property from the prior visit(s) ) on [insert known dates or approximate dates] and/or a review of the attached [specify number of attachments] photographs/videos which were taken by [insert source] that were taken on [insert date(s) if known; otherwise indicate on unknown date]. Buyer should carefully review all prior disclosures and reports. Buyer should also consult with a qualified California real estate attorney regarding Buyer’s rights, duties and obligations in view of the Seller’s refusal to allow access for the Buyer’s Agent’s visual inspection.
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SCENARIO #3 – SELLER’S AGENT DOES NOT COMPLETE AN AVID EVEN THOUGH THERE ARE NO IMPEDIMENTS TO DOING SO
Seller’s Agent “completed” an AVID following the statewide SiP Order, stating simply that no inspection was possible due to COVID-19; that AVID was distributed to all Buyers’ Agents who indicated an interest in the Property.
If Buyer’s Agent receives an AVID from a Seller’s Agent that indicates that the Seller’s Agent never conducted an inspection of the Property even though there are no current impediments to conducting such an inspection, then Buyer’s Agent should advise the Buyer to review the Seller’s Agent’s AVID with their own qualified California real estate attorney before proceeding with the transaction to determine the Buyer’s potential claims and remedies.
Now there is no impediment to conducting any inspection and Seller will be reviewing Offers in a few days. Seller’s Agent should immediately conduct a competent, diligent, visual inspection and make disclosures on a new “REVISED” AVID form and send it to all Agents (who received the first version) with instructions to provide that AVID to their Buyers before presenting an Offer to avoid any claims that the Seller’s Agent is amending the TDS after the Offer is made.
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SCENARIO #4 – AGENT’S OWN HEALTH CONCERNS
An Agent on either side of the deal is unable to personally conduct their physical inspection of the Property due to their own health concerns. However, the Agent has some knowledge about the condition of the Property. That Agent should prepare the AVID based upon the extent of their actual knowledge and then follow the advice in SCENARIO #1.
If another Agent in the same Brokerage is available to go to the Property to perform the inspection and disclosure process, then that Agent should prepare, date and sign a second, separate AVID form and both AVID forms should then be provided to the Parties.