BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
SITUATION: Most claims against real estate agents arise out of an alleged nondisclosure or a failure to recommend an inspection. In reviewing and evaluating those nondisclosure claims, defense counsel will review several key documents which may be used to defend the claims including the following: Transfer Disclosure Statement (“TDS”); Seller Property Questionnaire; Agent Visual Inspection Disclosure (“AVID”); and inspection reports. While there may be a number of other reports and information, such as emails and texts which may be impactful upon the evaluation, these documents are the most significant. If an agent’s AVID is not properly prepared, it can lead to a claim for a violation of Civil Code §2079.6, et seq., and can enhance the buyer’s claim or can fail to provide any support for the defense of the case. Therefore, the AVID is an extremely important document for both the buyer’s use and in defending claims.
Agents are required by statute (Civil Code §2079) to undertake a reasonably diligent visual inspection of the property and disclose all information of which they are aware and are identifiable upon that inspection. The Transfer Disclosure Statement incorporates an agent’s visual inspection results on page 3. Although the AVID form itself is not required by law, it is recommended that an agent use CAR’s AVID form to complete that visual inspection as it has become the industry standard of practice. If an AVID form is being used, the agent should mark the box on the third page (“see attached AVID”) and attach the AVID to the TDS. In completing the AVID, agents should inspect every room of the property and write down any material defects, which they identify. That inspection also includes the exterior of the home and the property.
The purpose of an AVID is to identify any material issues which affect the value or desirability of the property. In other words, if you have the question, “Should I disclose this,” or “Should I write this down,” the answer is yes. AVIDs are not marketing materials. Therefore, your AVID should not identify positive attributes about the property. Further, a seller is not entitled to suggest edits, additions to, or deletions from, the seller’s agent’s AVID disclosures
In completing your AVID, use factual descriptions, do not use adverbs or adjectives. For example, if there is a crack in the living room, you would note, “Crack in the northeast corner of the living room.” You should not say, “minor cracking,” or “normal cracking.” If you describe the cracking as “normal” or “minor,” you have now warranted to the buyer that the cracking is within normal limits and the buyer should not be concerned about it. We are not engineers and should not be describing or opining on the cause or severity of cracking or any other conditions.
Agents should also identify any information which could affect value or desirability of the property of which they are aware, which may not be visual. For example, if an agent identifies a distinct smell, it should be disclosed. If the agent hears a noise, such as from a busy road, traffic, airplane, railroad, etc., those observations should be written on the AVID. Agents should also include any other information of which they are aware regarding the property or the neighborhood. For example, if an agent is holding open a home and a neighbor discloses a nuisance in the neighborhood, that nuisance would be disclosed as follows: “Neighbor reports that there is a nuisance in [identify what the neighbor said] in the neighborhood. Agent has not and will not verify the neighbor’s representation. Buyer to investigate the issue.”
AVIDs should be delivered as soon as possible. Please note that the seller’s agent’s AVID is considered part of the TDS and the TDS is not complete unless and until the seller’s agent’s AVID has been delivered to the buyer. A buyer may cancel the contract within three to five days of receiving a completed TDS with seller’s agent’s AVID. To be complete, a TDS must be completed by the seller and the listing agent. Therefore, it is imperative that seller’s agents provide their AVIDs as soon as possible to a buyer.
- Complete an AVID as soon as practicable and ensure it is timely delivered to the buyer. Seller’s agents in particular should always include their completed AVID attached to the TDS when delivered to buyer.
- Write on the AVID every material issue that the agent observes or identifies with all of the agent’s senses, as well as any and all information obtained by, or within the knowledge of, the agent.
- As with all agent disclosures, if the AVID contains any information obtained from third parties or sources, be sure to identify the source of that information (so that you don’t “own” that information) and state that you “have not and will not verify or investigate information provided by third parties.”
- “Disclose, but don’t diagnose.” This means that an agent should identify any material defects as facts, but should not diagnose the source of the fact.
- Agents should not use adjectives or adverbs.
- If a seller attempts to limit, edit or otherwise change your proposed AVID language (“It makes my property look bad.”), immediately contact your broker or manager.
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.