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The sellers have lived in their home for forty years. They installed a new roof eight years before signing the Contract to sell their home. The sellers honestly believed that they had a “new roof,” and they made that statement to the listing broker. The listing broker put in the MLS “new roof.” One month after close of escrow there was a major storm, and the buyers had significant roof leaks. Major repairs to the roof are required. Does either the seller or the listing broker have any liability to the buyers?

ANSWER:

Probably both. Although the sellers had no intent to defraud and believed that they were being honest, they did not act reasonably in representing that an eight-year-old roof was a “new roof.” The listing broker had an obligation to make reasonable efforts to confirm the sellers’ statement that there was a “new roof” before making that representation in the MLS. See ADRE Substantive Policy Statement No. 2005.13.

While the purchase contract for the sale of the home was pending, the seller was committed to a psychiatric ward. The listing agent is not aware of any of the details but only knows that there was a court order committing the seller to an institution. Does the listing agent have an obligation to disclose this information to the buyer?

ANSWER:

Yes.  A.A.C. R4-28-1101 requires an agent to disclose in writing all known material information to the parties to the transaction, including but not limited to information that the seller may be unable to perform. Accordingly, the recent chain of events should be disclosed to the buyer in writing.

Quick Quiz

Fill in the Blank:
A.A.C. R4-28-1101 an agent to disclose in writing all known material information to the parties to the transaction, including but not limited to that the seller may be unable to

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An agent entered into a listing agreement to sell a property for a seller. The agent had the seller fill out the Seller’s Property Disclosure Statement (SPDS) at the time of the listing appointment. The agent listed the property on the MLS and, three days later, the seller had a contract on his property. The listing agent sent the SPDS to the buyer’s agent. The buyer’s agent said the SPDS was unacceptable because it was signed and dated by the seller prior to contract formation. Does the SPDS have to be dated on or after the contract date?

ANSWER:                           

No.  The SPDS is a disclosure form offered by the Arizona Association of REALTORS® to assist seller’s with their legal obligation to disclose material information to a buyer.  The Residential Resale Real Estate Purchase Contract (Contract) requires that the seller deliver a completed SPDS within three (3) days after Contract acceptance.  However, the SPDS is not a part of the Contract and may, therefore, be dated before, on, or after the Contract date.  A good practice is to ensure the SPDS is signed and dated within a reasonable timeframe of Contract acceptance.

The seller receives an email from an officer of the HOA stating that the HOA is going to make a change that would dramatically affect the way the HOA governs the community. The change has not yet been announced to the other homeowners in the subdivision. Does the seller have to disclose the potential change in the HOA to the buyer prior to the closing?

ANSWER:

Yes. A seller must disclose known material facts. See Hill v. Jones, 151 Ariz. 81, 85, 725 P.2d 1115, 1119 (App. 1986).  A fact is material if it is one to which a reasonable buyer would attach importance in making a decision as to the consideration to be paid for the propertyId. Since the seller is now on notice of a potential change that will “dramatically affect the way the HOA governs,” the information should be disclosed.

Quick Quiz

Fill in the Blank:
A fact is if it is one to which a reasonable buyer would attach importance in making a decision as to the consideration to be paid for the .

Contained in the listing is a comment that the seller will not be providing a Residential Seller’s Property Disclosure Statement (SPDS) and that such must be waived by the buyer. If the buyer agrees to waive the SPDS, is the seller still required to disclose to the buyer known facts about the property?

ANSWER:

Yes.  Arizona law requires the seller to disclose material (important) facts about the property, even if not asked by the buyer or a real estate agent. These disclosure obligations remain even if the parties agree that no SPDS will be provided. As such, an agreement to waive the SPDS does not excuse the seller’s disclosure obligations. Rather, it often makes it: (1) harder for sellers to satisfy their disclosure obligations; and (2) more likely that sellers will inadvertently fail to disclose a material fact.

NOTE: Even when a property is sold in as-is condition, sellers are still subject to the same legally imposed disclosure obligations.

A real estate agent’s spouse has recently been elected to the position of County Assessor. Must the agent disclose this fact to parties to a transaction?

ANSWER:

Pursuant to A.A.C. R4-28-1101, “A real estate salesperson or broker shall not act directly or indirectly in a transaction without informing the other parties in the transaction, in writing, and before the parties enter any binding agreement, of a present or prospective interest or conflict in the transaction…” In this instance, as the spouse’s status as county assessor does not create an interest in any particular transaction, there is no requirement to disclose that fact.

Quick Quiz

Fill in the Blank:
A real estate or broker shall not act directly or indirectly in a transaction without informing the other parties in the .

ISSUE: In the seller’s property disclosure statement (“SPDS”), the seller denied that the home had ever been treated for termites. After the inspection period expired, the buyer learned that the seller had the home treated for termites. The buyer no longer wants the home. After being contacted by the buyer, the seller admits that he “forgot” to disclose in the SPDS the prior termite treatment. Can the buyer cancel the contract and get the return of the earnest money?

ANSWER:

Yes. Under Section 4f of the contract, the seller is required to update the SPDS to disclose the prior termite treatment. If the seller does not, the buyer is entitled to deliver a three-day cure period notice to the seller demanding that the seller update the SPDS to disclose the prior termite treatment. If the seller does not update the SPDS within three days, the buyer can cancel the contract and get the return of the earnest money. If, however, the seller does update the SPDS and discloses the prior termite treatment, the buyer can cancel the contract within five days and get the return of the earnest money.