I. BACKGROUND: For residential properties, 1-4 units, both the Seller’s Agents and the Buyer’s Agents have a statutory duty to:
“. . .conduct a reasonably competent and diligent visual inspection of the property offered for sale and to disclose to that prospective purchaser all facts materially affecting the value or desirability of the property that the investigation would reveal. . . ”
This statutory duty exists whether or not the Seller is legally required to fully complete the Real Estate Transfer Disclosure Statement (“TDS”). When the TDS first went into effect in I987, the TDS became the primary place where Agents document and disclose the results of their statutory inspection of the property. The TDS is not designed to be used by Agents when the Seller is exempt.
Problems arose because too many Sellers were exempt from the TDS and too many Agents failed to provide any information about their inspections; CAR also knew that many Agents need guidance on what they are to inspect.
For these reasons, CAR created the “Agent Visual Inspection Disclosure” (“AVID”) form for use by Agents to document and disclose the results of that inspection. However, not long after CAR created the AVID, it became the standard of care to use because the few lines available for Agents in Sections III & IV of the TDS were often inadequate for Agents to create a complete report. In many cases, it was found that Agents were picking and choosing what to report just so that it fit into this limited space.
So, while the AVID form itself is not required by law, it IS the best place for an Agent to report the results of their statutorily-required inspection and using the AVID is the statewide standard of practice.
Civil Code Section 2079, et seq, establishes the Agent’s inspection and disclosure duty as well the limits what is required, including the fact that Agents are not obligated to investigate reasonably inaccessible areas of the Property, any issue that is located off the site of the Property, or to search any type of public records (whether planning, zoning, permits, and/or other documents concerning the title or use of the Property). If the Property is a condominium, PUD or stock cooperative, the Agent’s inspection duty is limited to the unit offered for sale, and does not include investigating the common areas or other units.
But, as always, if you know anything about the Property or even have knowledge about matters you are not obligated to inspect, you must still disclose what you know.
II. WHEN IS AN AVID REQUIRED?
A. Whenever a TDS is required of the Seller in a residential 1-4 unit sale, including:
- Some new construction of homes where there is no Public Report, such as a single “spec” home or a subdivision with 2-4 units;
- Leases with an option to purchase;
- Ground leases of land improved with 1-4 residential units; and
- Real property installment sales contracts.
B. Whenever a Mobile Home TDS (“MHTDS”) is required of the Seller.
C. In the following 1-4 unit transactions where the Seller is exempt from completing a TDS:
- Probate sales;
- REO sales;
- Bankruptcy sale by the court-appointed trustee in bankruptcy; and
- Trust sales where the Seller-Trustee is exempt.
For more information as to when trustees are exempt from completing a TDS, see Weekly Practice Tip entitled: “Sale of Property Held in Trust – Disclosures” (10/5/18)
III. WHEN IS AN AVID NOT REQUIRED?
A. Any property other than residential 1-4 units. (e.g., 5+ residential, commercial, vacant land, etc.);
B. New construction that was completed pursuant to a Public Report. New construction subdivisions of 5+ homes where no Public Report was required because the sale is comprised of completed homes on lots and are ready for occupancy, there are no common areas and the entire subdivision is within city limits. (B&P Code 11010.4)
IV. TIMING OF THE AVID:
A. Listing Agents: Complete your inspection and AVID only AFTER the Seller has completed the TDS. The timing sequence is legally required because Paragraph III of the TDS states that the Listing Agent is completing their inspection report “based on the above inquiry of the seller(s) as to the condition of the property and based on a reasonably competent and diligent visual inspection of the accessible areas of the property in conjunction with that inquiry, states the following:”.
Be certain you have the Seller’s completed TDS with you when you complete your AVID inspection.
Deliver the Listing Agent AVID at the same time that a required TDS is delivered. It is NOT necessary for the Seller to sign the bottom of the AVID prior to delivery of the AVID to the Buyer or their Agent. The Seller’s signature on the AVID merely acknowledges receipt (not approval) of the AVID, just as the Seller’s signature in Section V of the TDS only acknowledges receipt of the fully-signed form.
B. Buyer Agents: Good practice dictates that you make your Agent’s inspection and disclosure in a timely manner, which should be promptly after contract Acceptance (except with the PRDS contract, the Agent’s AVID is required before contract Acceptance). Buyer’s Agents who delay completing their inspection and disclosure duty could face allegations of lack of diligence, or worse. Unlike the Listing Agent, the Buyer Agent cannot extend the timing on the Buyer’s right to rescind due to late delivery to their AVID.
C. Delivery of the AVID: Before delivering the AVID to anyone, make sure that you have confirmed that the TDS is fully completed and confirm that you have thoroughly and fully disclosed your knowledge of the condition, use, value or development of the Property.
V. BEST PRACTICES FOR USING THE AVID:
A. To fully meet your statutory duty to inspect and disclose, use the AVID form whether or not the Seller was required to complete TDS inspections (or a similar local or company form if recommended by your company).
B. Establish a routine for conducting your inspections. Some agents start their inspection at the street, walk up to the house, walk the yard, walk through the ground floor, other floors, etc. Having a set order for conducting the inspections helps prevent missing some aspect of the Property.
C. Complete the AVID as you do your inspection. Take notes of everything that you know and what you determine from the inspection. Even if the house is new or very clean, WRITE SOMETHING. You want to be able to demonstrate in a later claim that you did meet your statutory duty.
D. Do not write stock phrases such as: “Nothing to report.” “I agree with seller.” “Recommend that buyer have any and all inspections.” These statements do not prove that you were actually at the Property.
E. Do not use adjectives or superlatives such as: “House looks great.” or “Home has been beautifully remodeled.” The AVID is not a marketing flyer. Stick to objective disclosures.
F. If there are no noticeable defects in a room, simply write “no visual material defects” or leave that section blank. If there is a carpet covering the floor, simply note, “There is a carpet covering a portion of the floor; the hidden flooring is inaccessible and, thus, has not been inspected.” If the item on the AVID does not apply or is not present in the property (no second bathroom, e.g.), write “N/A” or “Not applicable.”
G. Stick to the facts. Do not characterize or assign responsibility for a condition or offer any suggestions for remedial action. For example, do not state “settlement crack.” The crack may not be caused by settlement at all. It is not a big crack, a normal crack, or a hairline crack. Just note that there is a “crack” at a particular location. Another example, do not state “water stain” because the stain may not be caused by water. Just state “stain” at a particular location. Finally, do not state: “Stains will be removed by Seller following simple cleaning.” The AVID is not a contract document regarding who will correct problems and not all stains can be removed by cleaning.
H. Use your senses. Note unusual smells or sounds. Noxious smells may come from nearby businesses or septic treatment facilities. Loud or intrusive sounds, when noted, should be reported, such as loud traffic noise, low-flying aircraft, industrial or school noise, etc. These are often the subject of buyer claims after close of escrow.
I. At times, the AVID can be the best place to disclose other information received by, or known to, an Agent apart from their inspection of the property. For example:
- Disclosing unverified information. If a neighbor, or other third party, makes a statement about the property or neighborhood that you cannot and should not verify (e.g., “The guy across the street is a sex offender.”, or: “The neighbors next door are selling drugs,” or “Seller’s fence is on myproperty.”), you must disclose the “fact” that that information has been disclosed to you and state that you have not verified it in the “attribute and disclaim” format. For example:
“On December 27, 202__ while I was at the property, the neighbor at ______________ stated to me that the people in the home at ________ (address) were dealing drugs from that address. Neither seller nor listing agent has investigated the truth or fallacy of that statement. If this is a matter of concern to buyers, buyers are urged to investigate and satisfy themselves with respect to this matter.”
See Weekly Practice Tip entitled “Attribute Disclose and Disclaim” (7/20/18)
- Information known by the Agent. If an Agent is aware of a pending development project in the area, or some other neighborhood condition, which could negatively affect the value or desirability of the Property, the Agent must disclose that information in writing, preferably on the AVID whether or not the Seller is aware of this situation.
- Catch-All Items. If you know any other facts or items affecting the value or desirability of the Property, add that information at the end of the AVID, or on an attached sheet that also has signature lines for the Agents, Seller and Buyer. This method provides greater assurance that the Buyer is getting the information that is legally required and which will enable the Buyer to make a knowledgeable decision about buying the Property.
J. If there is a TDS, check the box in your Agent’s portion of the TDS that states: “See attached Agent’s Visual Inspection Disclosure.” Then, attach the completed AVID to the TDS.
NOTE: For further information on best TDS practices, see: Weekly Practice Tip entitled “Handling the Transfer Disclosure Statement – The Right Way” (1/8/21)
K. COVID-19 Limitations on Access to Properties. Until such time as Public Health Guidance regarding the COVID-19 pandemic is no longer in effect, Sellers’ and Buyers’ Agents may encounter limited or no access to a property for purposes of completing their required visual inspection of the property in order to complete their AVID. In such event, review the Weekly Practice Tip on how to deal with that situation.
See Weekly Practice Tip “AVID During COVID-19” (4/3/20)
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is 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 2021 01/15/21