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REAL ETHICS by Steve Stazel | November 2009 | Index of all Real Ethics columns
REALTORS® are required to disclose latent defects
Your listing went under contract two weeks ago. One week ago the inspector found a defect which the sellers agreed to repair. The repairman, upon observing the problem, found additional items which should be done to adequately correct the original defect. These additional repairs would cost into the thousands of dollars. Your seller thinks he does not have to do the additional repairs since the buyer did not ask for them and instructs you not to disclose. What do you do?
You may want to have a gentle discussion with your seller and inform him or her that you both are required to disclose all latent defects in the property. Colorado law requires both the broker and the seller to disclose all adverse material facts (paragraph 18 of the listing contract).
Article 2 of the Code of Ethics states in part that “REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.” Additionally, the Ethics and Arbitration Manual of the National Association of REALTORS® states that “Any material fact that could affect a reasonable purchaser’s decision to purchase, or the price that a purchaser might pay, should be disclosed.”
If you do not disclose, you and your seller violate Colorado law and the Code of Ethics. Additionally, once the buyer finds out about the defect, you may become known as “the defendant” after the seller has moved out of state and you are the only one left with deep pockets (E&O insurance)...and you may still be liable for violating Colorado law.
Each month, the Aurora Outlook features RealEthics, a column by Steve Stazel devoted to explaining Code of Ethics issues for members. The comments stated in this article are those of the author and do not necessarily represent the views of the National Association of REALTORS®, the Colorado Association of REALTORS® or the Aurora Association of REALTORS®. Ultimately, a hearing panel of the Professional Standards Committee determines whether a violation of the Code of Ethics has occurred on a case-by-case basis. These comments should not serve as the foundation of any ethics complaint, arbitration request or response.
If you have an ethical concern or an issue you would like
to see addressed, please call Stazel at (303) 773-3333 or e-mail him at
stazels@msn.com. The comments of this article reflect the understanding and
opinions of the author and do not represent an official expression of policy by the National Association
of REALTORSŪ.
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