Too much Disclosure
Last month the California Association of Realtors, CAR, released yet another disclosure form for their members to complete when listing or selling residential property. The form is entitled Agent Visual Inspection Disclosure (AVID). The new three-page inspection form is unique from other property disclosures that generally originate with the seller and are transmitted to the buyer for review and approval. The new AVID originates from the listing or selling agent and then is transmitted to the principals. Is this additional disclosure really necessary?
State law already requires the listing and selling agents to complete their own disclosure section in the Real Estate Transfer Disclosure Statement (TDS). CAR must have felt that the 3 lines in the existing TDS wasn’t sufficient enough to disclose all material facts that could affect the property’s value. The new AVID compels an agent to make a diligent room-by-room inspection of the home and write down their findings. I see myself spending more time in the seller’s bathroom making sure I write down every maintenance issue, not forgetting to check for soap-sum in the shower or rust stains in the toilet. Does the garage have an oil stain on the floor? Are their crumbs in the kitchen cabinets?
The first page of the AVIR puts the buyer or seller on notice that the agent’s inspection is limed to the areas of a home that are reasonably and normally accessible. We don’t go crawling around attics or upon roofs. We don’t go checking all the appliances and systems to insure they run normally and we are not responsible for discovering any environmental hazards. Homebuyers should take on that responsibility or delegate it to other professionals. The first page statements regarding an agent’s limitations on inspection duties are fine but already exist in many other disclosures currently in use.
The next two pages begin with bold caps: THE UNDERSIGND, BASED UPON A REASONABLY COMPLETE AND DILIGENT VISUAL INSPECTION OF THE REASONALBLY ACCESSIBLE AREAS OF THE PROPERTY, STATES THE FOLLOWING. Underneath is listed 19 specific areas in the home such as: kitchen, dinning room, bath and bedrooms, hallways, etc., with an abundance of lines and white space begging to be filled-in. The agent is supposed to describe the area’s condition. Since when did real estate agents become home inspectors? How much does a “competent and diligent visual inspection reveal about a half-bath? Small, leaky faucet, dirty grout, cheep fixtures? The form also has a place for weather conditions and other persons present? What’s next, fingerprints and notarization?
There are already too many disclosures in a real estate deal. Adding another one will not reduce the number of after-sale complaints about a property’s condition or the number of lawsuits. A typical residential transaction will generate 18 disclosures and advisories consisting of 37 pages in single spaced 8-point type. That doesn’t include the original offer, counter-offers and addendums. Each office then has their own set of office disclosures, as do some cities and counties. Then comes all the inspection reports (and their subsequent disclosures). The reality is that few buyers, sellers and even some agents read them all. The same holds true for loan documents. When did anyone read every page of his or her loan documents? Calhoon’s theory on disclosures: “The more there are, the less likely they will be read.”
The problem with the plethora of standard real estate and loan documents is that they are high on volume and low on comprehensibility. The same applies to insurance policies, credit card agreements and corporate public reports. We have to wonder if so much duplicity serves a meaningful purpose. Having become overwhelmed in what appears to be “standard papers” we are likely to just sign or initial. The current flap with subprime lending wasn’t caused by an absence of standardized disclosures. Homebuyers don’t need another form. They need a trusted advisor who can evaluate all the inspections, reports and disclosures and then provide a “Broker Summery.”
Most of my clients just want to know the bottom line. How much will it cost? What’s the monthly payment? What problems exist now? What do I need to be concerned about in the future? A “Broker” or “Executive Summary” could point out the key issues that the broker feels are important in the transaction. A summary page would not eliminate any existing disclosures or the additional ones that will inevitability come along in the future. It would, however, highlight what the agent/broker feels are important in the deal.
Clients don’t retain agents to point out dirty carpets and chipped kitchen tile. Sellers and home inspectors provide that information. Clients utilize the services of an agent as a trusted advisor, helping them focus on the key objective of buying or selling a property.
State law already requires the listing and selling agents to complete their own disclosure section in the Real Estate Transfer Disclosure Statement (TDS). CAR must have felt that the 3 lines in the existing TDS wasn’t sufficient enough to disclose all material facts that could affect the property’s value. The new AVID compels an agent to make a diligent room-by-room inspection of the home and write down their findings. I see myself spending more time in the seller’s bathroom making sure I write down every maintenance issue, not forgetting to check for soap-sum in the shower or rust stains in the toilet. Does the garage have an oil stain on the floor? Are their crumbs in the kitchen cabinets?
The first page of the AVIR puts the buyer or seller on notice that the agent’s inspection is limed to the areas of a home that are reasonably and normally accessible. We don’t go crawling around attics or upon roofs. We don’t go checking all the appliances and systems to insure they run normally and we are not responsible for discovering any environmental hazards. Homebuyers should take on that responsibility or delegate it to other professionals. The first page statements regarding an agent’s limitations on inspection duties are fine but already exist in many other disclosures currently in use.
The next two pages begin with bold caps: THE UNDERSIGND, BASED UPON A REASONABLY COMPLETE AND DILIGENT VISUAL INSPECTION OF THE REASONALBLY ACCESSIBLE AREAS OF THE PROPERTY, STATES THE FOLLOWING. Underneath is listed 19 specific areas in the home such as: kitchen, dinning room, bath and bedrooms, hallways, etc., with an abundance of lines and white space begging to be filled-in. The agent is supposed to describe the area’s condition. Since when did real estate agents become home inspectors? How much does a “competent and diligent visual inspection reveal about a half-bath? Small, leaky faucet, dirty grout, cheep fixtures? The form also has a place for weather conditions and other persons present? What’s next, fingerprints and notarization?
There are already too many disclosures in a real estate deal. Adding another one will not reduce the number of after-sale complaints about a property’s condition or the number of lawsuits. A typical residential transaction will generate 18 disclosures and advisories consisting of 37 pages in single spaced 8-point type. That doesn’t include the original offer, counter-offers and addendums. Each office then has their own set of office disclosures, as do some cities and counties. Then comes all the inspection reports (and their subsequent disclosures). The reality is that few buyers, sellers and even some agents read them all. The same holds true for loan documents. When did anyone read every page of his or her loan documents? Calhoon’s theory on disclosures: “The more there are, the less likely they will be read.”
The problem with the plethora of standard real estate and loan documents is that they are high on volume and low on comprehensibility. The same applies to insurance policies, credit card agreements and corporate public reports. We have to wonder if so much duplicity serves a meaningful purpose. Having become overwhelmed in what appears to be “standard papers” we are likely to just sign or initial. The current flap with subprime lending wasn’t caused by an absence of standardized disclosures. Homebuyers don’t need another form. They need a trusted advisor who can evaluate all the inspections, reports and disclosures and then provide a “Broker Summery.”
Most of my clients just want to know the bottom line. How much will it cost? What’s the monthly payment? What problems exist now? What do I need to be concerned about in the future? A “Broker” or “Executive Summary” could point out the key issues that the broker feels are important in the transaction. A summary page would not eliminate any existing disclosures or the additional ones that will inevitability come along in the future. It would, however, highlight what the agent/broker feels are important in the deal.
Clients don’t retain agents to point out dirty carpets and chipped kitchen tile. Sellers and home inspectors provide that information. Clients utilize the services of an agent as a trusted advisor, helping them focus on the key objective of buying or selling a property.
posted by Ken Calhoon at 6:32 AM
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