Agents Duty to Disclose: The Obligation to Make a Visual Inspection

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A Broker’s duty to a buyer was forever changed in 1984 with the case of Easton v. Stassburger, 152 Cal.App.3d 90(1984). The ruling in Easton stated that Brokers had an affirmative duty to conduct a “reasonably competent and diligent inspection of residential real property listed for sale and to disclose to prospective purchasers all facts materially affecting the value or desirability of the property that such an investigation would reveal”. (Easton at 102)

However, the Easton Court’s ruling was vague and raised many questions regarding interpretation. What did “competent and diligent” entail regarding the scope of the inspection? Based on Easton’s “competent and diligent” language, it could be argued that the Broker was required to essentially be a home inspector, which is not an expertise possessed by most Brokers (and is certainly not a part of their training).

The California legislature sought to clarify the Easton ruling with California Civil Code section 2079 (hereafter referred to as “section 2079”). Pursuant to section 2079, Brokers have a duty to prospective buyers to conduct a reasonably competent and diligent “visual” inspection of real property offered for sale and disclose any material facts affecting the value or desirability of the property. The “visual” inspection language of section 2079 provided the much need clarification to the Easton ruling.  Section 2079 explicitly stated that a Broker’s inspection would be strictly limited to what they could see.

How does a Broker fulfill their duty under California Civil Code section 2079? Most Brokers turn to the California Association of Realtors (C.A.R.) for guidance. C.A.R. has crafted the Agent Visual Inspection Disclosure Form (“AVID”). This form provides a systematic process for an agent to conduct their visual inspection. However, the form provides little advice on how items should or should not be noted in the report.

It is important to understand that section 2079 requires a “visual” inspection only. As the C.A.R. form states, there is no obligation to look under carpets, in crawlspaces, attics, or even move furniture.

When filling out the AVID, stay away from generalizations that describe any condition with the property. Do not make statements such as “Family room looks good.” This does not indicate you fulfilled your duty under section 2079. Be more specific, such as “Manufactured floors in family room.” Note items such as mismatched flooring, missing curtains, or missing drawer pulls. Being more specific demonstrates that you have taken the time to visually observe the property and provide an adequate visual inspection.

It is also important to note any negative condition with the property. If you see chipped paint or scratches on floors, note these on the AVID. Negative comments demonstrate you have performed the required visual inspection and that you are not hiding anything.

Also, don’t use the AVID as an opportunity to further market the property. You should not make statements such as “stunning views from the family room.” Again, this does little to show you have conducted the required inspection and may even infer the Broker is trying to hide something.

The Broker should also not make assertions outside their area of expertise. Brokers must understand, unless they have the appropriate license or training, they should not make statements in the AVID properly attributed to another professional, such as a plumber, electrician, pest control professional, or similar. For example, Brokers must not make any statement such as “Evidence of rodent droppings, possible infestation.” Observing droppings is one thing, but determining they are rodent droppings and then declaring an infestation goes beyond the scope of the Broker’s duty. In fact, the Broker is holding themselves out as an expert by identifying the dropping and then declaring an infestation. Unless the Broker is a pest control professional, they have no expertise on which to base their statement.

The observations placed in the AVID are important. The AVID is the written record of the Broker fulfilling their duty pursuant to California Civil Code 2079. As such, it is imperative that Brokers pay special attention to what they observe and how it is noted in the AVID.

About Tim Burke

Tim is a licensed attorney in California and Nevada. He brings over 19 years of transactional and litigation experience to JohnHart. Prior to joining JohnHart, Tim was in private practice providing legal guidance to clients on Real Estate, financial, corporate, estate planning, and employment matters.

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