BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Completing the Agent Visual Inspection Disclosure (AVID) the Right Way
I. BACKGROUND: For residential 1-4 unit properties, unless an exception applies, both listing and selling 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. . . ”
The Real Estate Transfer Disclosure Statement (“TDS”) is the place where agents report the results of their statutory inspection of the property. However, the few lines available on the statutory form of the TDS for this purpose did not leave a lot of room for a complete report. In many cases, it was found that agents were inadequately reporting the results of their inspection because of this limited space.
For that reason, CAR created the “Agent Visual Inspection Disclosure” (“AVID”) form as a place for agents to fully report the results of that inspection. So, while the AVID form is not itself required by law, it IS the best place for an agent to report the results of their statutorily-required inspection of the property.
NOTE: According to the Civil Code, you do not have to investigate inaccessible areas, areas off the site of the subject property, or public records or permits concerning the title or use of the property. Also, on condominiums, PUD’s or stock cooperatives you only have to inspect the unit offered for sale, not the common areas or other units.
But, as always, if you know, you must disclose.
II. WHEN AN AVID IS REQUIRED:
A. Whenever a TDS is required of the seller in a residential 1-4 unit sale, including:
1. New construction of homes where there is no Public Report, such as a single
“spec” home, or a subdivision with 2-4 units.
2. Leases with an option to purchase,
3. Ground leases of land improved with 1-4 residential units, and
4. Real property installment sales contracts.
For more information on when a TDS is required, see CAR Legal Memo entitled “Transfer Disclosure Statement Law” at:
http://www.car.org/legal/disclosure-folder/transfer-disclosure-statement/?redirectFrom=login
B. Whenever a Mobile Home TDS (“MHTDS”) is required of the seller.
C. In the following cases where the seller is exempt from completing a TDS:
1. Probate sales
2. REO sales
3. Bankruptcy sale by the court-appointed trustee in bankruptcy
4. Trust sales where the trustee-seller is exempt
For more information as to when trustees are exempt from completing a TDS, see Weekly Practice Tip entitled: “Trust Sale Disclosures”
III. WHEN AN AVID IS NOT REQUIRED:
A. Any property other than residential 1-4 units. (e.g., 5+ residential, commercial, vacant land, etc.)
B. New construction pursuant to a Public Report. Also, new construction subdivision of 5+ homes where no Public Report was required because the sale is 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. This is 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:” So, be sure to have the seller's completed TDS with you when you complete your AVID inspection.
Deliver your Listing Agent AVID along with the TDS if seller is required to complete the TDS. It is NOT necessary for your seller to sign the bottom of the AVID prior to delivery of the AVID to the buyer or their agent, just as there is no need for the seller to sign at the end of Section III of the TDS if the listing agent were to write their disclosure information there. The signature at the end of the TDS for seller can be added later just to evidence that they received a copy.
B. Buyer Agents: Good practice dictates that you make your agent’s inspection and disclosure in a timely manner after prompt acceptance. Buyer’s agents who delay in this duty could face allegations of lack of diligence, or worse.
V. COMPLETING THE AVID: The TDS is the second most important document in a sale transaction after the purchase contract. One of the largest categories of claims against agents and brokers is “failure to disclose.” Thus, the AVID becomes the main focus of a great many claims and suits. A common claim is that while the seller and agents did disclose a condition, they did not fully disclose so as to put the buyer on notice of the magnitude of the problem. Make sure that you have thoroughly and fully reported the condition of the property.
A. Use the AVID form for all of your TDS inspections (or a similar local or company form if recommended by your company). Sections III and IV of the TDS simply do not have enough space to adequately report the results of your inspection.
B. Establish a routine for doing your inspection of the property. Some agents start at the street, walk up to the house, walk the yard, walk through the ground floor, other floors, etc. Having a routine keeps you from making mistakes.
C. Complete the AVID as you do your inspection. Take notes of what you see. Even if the house is new or very clean, WRITE SOMETHING. You want to be able to demonstrate years later if there is a claim that you did your statutory duty.
D. Do not write: “Nothing to report.” “I agree with seller.” These comments add nothing and do not demonstrate that you did your statutory duty to inspect.
E. Do not use superlatives such as “House looks great.” or “Home has been beautifully remodeled.” This is not selling or marketing. Stick to factual disclosures.
F. Just writing: “Recommend that buyer have any and all inspections” is NOT sufficient to meet the agent’s statutory duty of a diligent visual inspection of the property.
G. If you go into a room or an area of the house and there are no noticeable visual defects, simply write “no visual material defects.” If there is a carpet covering the floor, simply note, “There is a carpet covering a portion of the floor and the floor underneath the carpet 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.”
H. Stick to the facts. Don’t characterize or assign responsibility for a condition. For example, do not say “settlement crack.” It 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. Do not say “water stain” because the stain may not be caused by water. It’s just a “stain.”
I. 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.
J. Sometimes the AVID is the best place to disclose other information received by, or known to, an agent apart from their inspection of the property. For example:
(1) Disclosing unverifiable information. If a neighbor, or other third party, makes a statement about the property or neighborhood that you cannot 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 my property.”) you must disclose the “fact” of that disclosure to you, and state that you have not verified it in the “attribute and disclaim” format. For example:
“On July 27, 201__ 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.”
This format can also be used for a seller disclosure where a third party has conveyed negative information to the seller.
See Weekly Practice Tips entitled “Disclosing Unverifiable Information” and
“Attribute and Disclaim”
(2) Information known to the agent. For example, if the agent is aware of a pending development project in the area, or some other neighborhood condition, which could negatively affect the property, but seller is unaware of this situation, the agent can add this information in the AVID.
(3) Catch-All Items. If you have any other facts or items affecting value or desirability, or which need full disclosing, you can add them to the end of the AVID, or to an attached sheet. This way the buyer is assured of getting that information along with the other disclosures so as to create a true and complete picture of the property.
K. Check the box in your agent’s portion of the TDS that says: “See attached Agent’s Visual Inspection Disclosure.” Then attach the AVID to the TDS.
NOTE: For further information on TDS practice in general see: Weekly Practice Tip entitled “Transfer Disclosure Statement – The Right Way”
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 2013 09/27/13