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The broker represents the seller. There was a murder in the property that is being sold. The seller/owner does not want the real estate agent/broker to disclose this information to any potential buyer(s). Does the broker/agent have to disclose the murder? If the potential buyer asks about a murder/death, does the broker/agent have to disclose?
Neither the seller nor the brokers in the transaction have liability for failing to disclose the murder/death to a potential buyer. See A.R.S. § 32-2156. If directly asked by the buyer if there have been any deaths in the home, the seller and broker are not obligated to respond. However, if the seller and/or broker choose to answer the question, they must respond truthfully and cannot deny that there has been a death in the home nor can they provide a misleading response.
The brokerage has taken a listing for a property in Sonoita, Arizona, and there have been recent reports of drug trafficking activities in the area, including the use of “drop” houses. At this point, the brokerage is only aware of rumors to this effect; the brokerage does not have actual knowledge of any drug trafficking-related crimes in the neighborhood or surrounding area. Should rumors of criminal activity in the surrounding area be disclosed? Also, if the seller elects not to disclose, is that decision binding on the listing agent, or does the listing agent have his or her own disclosure obligation?
Arizona law provides that a seller of real property must disclose all known facts which materially affect the value of the property, and which are not readily observable or known to the buyer. See Hill v. Jones, 151 Ariz. 81 (App. 1981). The seller’s agent likewise has an obligation to disclose information that would materially affect the consideration to be paid by a buyer, regardless of whether the seller makes such disclosure. See A.A.C. R4-28-1101(B).
Therefore, if either the seller or listing agent has actual knowledge of criminal activity in the surrounding area which would materially affect the consideration to be paid by a reasonable buyer, such information must be disclosed. In this instance, however, neither the seller nor the listing agent has actual knowledge of criminal drug trafficking in the surrounding area, and we are aware of no Arizona law that requires the disclosure of rumor or speculation. As such, the rumors probably do not need to be disclosed, but certainly could be in an abundance of caution.
Finally, please note that if criminal activity occurred at the subject property itself, rather than the surrounding area, it would not need to be disclosed. Arizona’s stigmatized property statute, A.R.S. § 32-2156, provides that the failure to disclose that a property “is or has been… [t]he site of a natural death, suicide or homicide or any other crime classified as a felony” cannot result in liability. See A.R.S. § 32-2156(A)(1). Accordingly, even if the seller or listing agent had actual knowledge that the property itself had been used in furtherance of drug trafficking activities, neither the seller nor the listing agent would be obligated to disclose such information
The seller owns a home on several acres of land in an unincorporated area of Pinal County. The home is not in a subdivision. If the seller sells the home will the seller be required to execute an Affidavit of Disclosure?
Yes. The Affidavit of Disclosure required by A.R.S. §33-422 applies to all “parcels of land” in an unincorporated area of a county unless the parcel of land has been subdivided. This Affidavit of Disclosure requires the disclosure of factors such as the availability of utilities and access to the parcel of land and applies to residential, commercial, and industrial real property, whether improved or unimproved.
Is an Affidavit of Disclosure required where a seller owns more than six (6) parcels in an unincorporated area of the county?
No A.R.S. § 33-422 provides that:
A Seller of five or fewer parcels of land, other than subdivided land, in an unincorporated area of a county and any subsequent seller of such a parcel shall furnish a written affidavit of disclosure to the buyer, at least seven days before the transfer of the property, and the buyer shall acknowledge receipt of the affidavit.
In other words, a seller is required to furnish an Affidavit of Disclosure to the buyer seven days before the transfer of the parcel(s) if the seller is (1) selling five or fewer parcels of land, (2) these parcels are not subdivided land, and (3) these parcels are located in an unincorporated area of a county. Id. The subdivided land is defined by A.R.S. § 32-2101(56) as “improved or unimproved land or lands divided or proposed to be divided for the purpose of sale or lease, whether immediate or future, into six or more lots, parcels or fractional interests.”
Here, the seller is, in fact, selling parcels in an unincorporated area of the county. However, the parcels the seller seeks to sell are six or more, not five or less as the statute provides. Accordingly, an Affidavit of Disclosure is not required by statute. However, a Subdivision Public Report may be required. Independent legal counsel should, therefore, be consulted.
During the inspection period, the buyer retained a home inspector who produced a written report identifying a property defect of which the seller was previously unaware. Pursuant to Section 6a of the Arizona Residential Resale Real Estate Purchase Contract (purchase contract), the buyer provided the seller with a copy of the inspection report and then timely canceled the purchase contract based on the results of the home inspection. Thereafter, the seller entered into a contract with a new buyer. Must the seller provide the new buyer with a physical copy of the first buyer’s home inspection report?
No. Although sellers have a duty to disclose known facts materially affecting the value of the property that are not readily observable, the seller is not obligated to provide the new buyer with a copy of the first buyer’s home inspection report. In fact, the better practice is for the seller to update their Seller’s Property Disclosure Statement (SPDS) to ensure that it includes the information contained on the inspection report, and then provide the updated SPDS to the new buyer. Although Arizona statute does not preclude the seller from conveying the actual report, doing so may lead the buyer to rely on that report and not obtain their own independent inspection. Since the first home inspector owes no duty to the new buyer, it is best for the buyer to obtain their own home inspection.
In the SPDS the seller disclosed that a defective water heater had caused flooding in the home, and that the defective water heater had been replaced with a new water heater. After the inspection period and just prior to close of escrow the buyer discovers that the seller had also replaced the carpeting in the home because of the flooding. The buyer wants to cancel the contract. Can the buyer cancel the contract because the seller did not disclose that the carpeting had been replaced?
Probably not. Although the seller did not disclose that the carpeting had been replaced, the seller did disclose that there had been flooding in the home. If the buyer was concerned about the extent of the damage to the home because of the flooding, the buyer should have conducted a more thorough investigation during the inspection period.