Technology TransactionsHow Much Disclosure Is Enough?
It used to be that buying a home was a great
adventure: Purchasers were never quite sure what
they were getting because the rule of the day was
"buyer beware."
But in the past decade there"s been a radical
change in the marketplace. Professional home
inspections are entirely common, buyer brokers
represent purchasers, and seller disclosure
statements created by state governments are used
universally. And yet, despite such advances, the
question of what is disclosed or should be
disclosed is sometimes fuzzy.
For instance, consider the matter of "stigmatized"
houses. These homes are physically fine but not
for everyone -- for example, properties which have
been the site of a suicide or murder. Must the
owner tell? What if the event happened many years
ago? How much time is enough? The rules vary by
state.
Consumers today want to know about the physical
condition of a home and much more. For instance,
which broker represents which party in a
transaction. Is the broker representing the buyer
or the seller, both parties as a dual agent, or is
the broker a facilitator trying to bring buyer and
seller together?
In the usual case, disclosure is covered generally
in real estate education classes. But now the
state of Arizona is trying something new, classes
now for the state"s 700 approved real estate
instructors devoted entirely to the matter of
disclosure -- and later this year a new disclosure
education requirement for all real estate
licensees.
"Disclosure of all sorts of information about real
property offered for sale is becoming an
increasingly complex matter," says Arizona Real Estate
Commissioner Jerry Holt. "According to legal
experts, 70 to 80 percent of all real estate law
suits are filed by buyers, and nearly all of these
suits address disclosure matters."
"Even though some important aspects of disclosure
law are usually covered in other core required
courses, like agency and contract law, under the
present continuing education requirements a
licensee can go a whole career without the mega
dose of exposure to disclosure law the subject
merits," says Edwin J. Ricketts, Arizona"s Deputy
Commissioner of Real Estate from 1991 to 1997.
As well, Ricketts says "then, as now, it occurred
to me that most licensee law violations were in
the area of disclosure, whether it was property
defects, agency related, secret compensation, a
licensee"s interest in the deal as a principal,
etc. Obviously, licensee education in the area of
disclosure law is beyond merely important -- it"s
essential to the public interest."
"I spend my days defending brokers," says Robert N.
Bass, a Phoenix-based attorney who specializes
in real estate litigation, risk reduction, and
education, "and time after time I see the same
kinds of mistakes being made by the licensees."
Bass said he has been surprised by the response to
the all-disclosure class.
"Arizona"s Real Estate Commissioner took a bit of
a risk by implementing a new rule requiring that
all licensees attend a three-hour course on
disclosure," says Bass. "I was expecting some
resistance from the brokerage community, but every
broker I"ve talked to thinks it is a great idea.
The AZ Association of Realtors was heavily
involved in developing the program, and the
industry seems squarely behind it."
The instructor development workshop will address
such topics as a broker"s obligation to
investigate, verify and discover. In essence, what
is the duty a real estate licensee to interpret a
property disclosure statement, check zoning, or
assure that the home really has a connection to
public sewer lines?
Ricketts says the Arizona effort is unique.
"To my knowledge, no other state has recognized
the coming of age, so to speak, of disclosure law
as a concentrated academic and practitioner issue.
And I"m certainly not aware of any other state
mandating a disclosure law continuing education
course."
Beginning July 1, 2002, Arizona real estate
licenses must take a new three-hour continuing
education disclosure course. Classes are expected
to be available from most real estate schools in
the state.
No less interesting, if the Arizona program is a
success -- if claims against real estate licensees
tend to fall -- then similar disclosure courses
are likely to emerge in other states.
"If other states are able to develop a disclosure
course of this caliber, it will take the practice
of real estate to a higher level," says Bass, who
lectures before industry groups nationwide. "At a
time when many are questioning the continuing
value of real estate agents, I think the long-term
effect off this kind of program will be to improve
the public"s perception of this industry."
The Arizona Real Estate Educators Association (AZ
REEA) is coordinating the instructor workshops.
Attendees will be awarded three hours of
Commissioner"s Rules and three hours of Real
Estate Legal Issues. Registration is $40 per
attendee, and 260 pages of material will be
distributed.
The instructor panel members are all real estate
lawyers: Michelle Lind, James Eckley, Dan
Kloberdanz and Richard Mack.
The first course was taught March 1st and a second
session is set for April 5th. Other sessions may
also be held. For details, contact Ricketts, the
2002 AZ REEA president, by e-mail or
call: 602-277-4332.
For more articles by Peter G. Miller, please press
here.