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Agent's Inspection Should Be Both Timely and Documented

Written by on Monday, 29 April 2013 7:00 pm
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The Code of Ethics of the National Association of Realtors® admonishes its members not to conceal pertinent facts about a property (Article 2). The laws of many states put this in a more affirmative form, requiring that an agent disclose known material facts. California is a state that takes an agent’s disclosure responsibility a step further. Not only must an agent disclose what he or she already knows, but also there is an obligation to do a bit of investigation.

California Civil Code section 2079 requires both a buyer’s agent and a seller’s agent "to conduct a reasonably competent and diligent visual inspection of the property offered for sale and to disclose to [the] prospective purchaser all facts materially affecting the value or desirability of the property that an investigation would reveal…" The investigation is not excessively demanding. The code specifies that it "does not include or involve an inspection of areas that are reasonably and normally inaccessible to such an inspection, nor an affirmative inspection of areas off the site of the subject property or public records or permits concerning the title or use of the property…"

Furthermore, compliance with the law does not demand expertise in fields such as construction, engineering, or geology. The code states that the standard of care is "the degree or care that a reasonably prudent real estate licensee would exercise" and that it is measured by the degree of knowledge "required to obtain a license".

Some years ago the California Association of Realtors® (CAR) introduced the Agent Visual Inspection Disclosure (AVID) form, designed to help agents in fulfillment of their inspection duties. It is not a detailed check list like a professional inspector might use. It mostly consists of sections of blank lines where agents may record their findings. The headers of the sections refer to different areas of the property (e.g. kitchen, family room, etc.), and there is plenty of room for "other." The purpose of the form is simply to give agents a place and an occasion to record their observations of any items that might materially affect the value or desirability of the property. Sometimes there is nothing to report of that nature. That is ok. Maybe there is nothing to report about the bedrooms, but there might be a reportable stain on the living room ceiling. The AVID helps to organize those facts.

The AVID is not a legally-mandated form, although many offices now require its use. In many areas its use has evolved into a standard of practice. What is not so standard, though, is the manner and the timing of its use.

Let’s face it: doing a "reasonably competent and diligent visual inspection of the property" is not one of the favorite activities of most real estate agents. Thus it is that in many, many cases, even when an agent does complete an AVID (usually because it is office policy), it is liable to be sparse, at best, and the agent is liable to have put off doing it until fairly late in the transaction.

There is nothing illegal about doing things this way. The law doesn’t specify when an agent is to do his inspection, nor does it require that his or her disclosure of property conditions even be in writing. But common sense comes into play here.

A good risk management principle is to ask the question: "how would this look at a trial?" Which would look better: that an agent had performed his inspection and disclosed its results only just before closing; or that it was done when the buyer would have ample time to make further investigation and/or to act upon what he had learned?

In a standard California residential transaction, the buyer has an initial seventeen day period within which to do his due diligence - order inspections and conduct investigations about the condition of the property. After that - unless some other agreement has been made - he is to remove his inspection contingency. An agent who doesn’t conduct his inspection until after the buyer has removed the property condition contingency will not appear to have served the buyer well.

As to the manner in which an agent completes the AVID - or whatever form he is using - we acknowledge that there is no particular virtue to verbosity. On the other hand, blank spaces with no comment whatsoever don’t look very good. A clever plaintiff attorney might even suggest they are an indication that the agent hadn’t even looked.

This can be dealt with in a couple of ways. (1) In those places where a form provides for a comment about an area that doesn’t exist (e.g. bathroom #3 when there are only two bathrooms), a simple N/A will do. (2) Suppose there is a room, say bedroom #2, where there is nothing negative to report (such things do happen), it is always ok to indicate "nothing to report" (NR if you wish), but also, note the color of the room or its carpet, etc.

Agents are well advised to report something simply to show that they were there and that they looked. If they do, they would look better at a trial.

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  About the author, Bob Hunt

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.