Competence and ethics in real estate disclosure
Q: As a home investor in several states, I find the practice of real estate disclosure to be an unethical mess. In most states, disclosure is mandatory for sellers and agents, while in others, the laws are full of loopholes. Sellers rarely know what defects to disclose, and the agents wouldn’t recognize a defect if it was labeled.
But the real slap in the face is from agents who recommend incompetent home inspectors. I never know the true condition of a home until I move in. If I complain about the lack of disclosure, the sellers claim they didn’t know, the agents pass the buck to the home inspector, and the inspector recites a list of disclaimers in the inspection contract.
It’s all a sad joke, but everyone is safe behind the letter of the law. This may be a rhetorical question, but what ever happened to disclosing defects simply because it’s the right thing to do?
A: You’re not the first to echo this complaint. Defect disclosure is hampered in the two ways you have noted. First is the inability of many sellers, agents, or home inspectors to provide adequate disclosure. The second is a failure of some to recognize the ethical importance of disclosure.
In most states, sellers must provide a written statement of known defects. These disclosure statements rarely contain pertinent information because the majority of actual defects involve issues that homeowners seldom see and probably wouldn’t recognize, such as improper wiring in a breaker panel or a chimney defect in the attic. Sellers who are serious about disclosure should hire a competent home inspector for a presale inspection.
Realtors in most states are required to disclose what they know. Degrees of compliance vary from one individual to the next, depending on the ethics they learned from their parents or in kindergarten. The litmus test of disclosure ethics involves which home inspectors agents refer to their trusting clients. Most agents are familiar with the relative abilities of local inspectors. They know which inspectors are more or less thorough in their findings, and these impressions are routinely discussed within real estate offices. For agents who are truly ethical, only the most thorough inspectors will do. For the ethically disabled, those who had problems with sandbox etiquette, the best inspectors are commonly known as “deal killers.”
Home inspectors vary widely in their abilities to discover and disclose defects. The reason for this disparity is that home inspection is a learn-as-you-go business. It is not possible to be qualified at defect discovery without having been a full-time inspector for several years. This means that new inspectors must learn their trade at the expense of their first customers. After several hundred substandard inspections, the new inspector begins to catch on. After a few thousand, true competence begins to manifest. To paraphrase an old adage, “There are new home inspectors and true home inspectors, but there are no new, true home inspectors.”
Buyers can obtain adequate disclosure if they understand these realities. When you buy, don’t expect much in the way of disclosure from sellers or agents. They probably don’t have much to disclose and may or may not be committed to the ethical demands of disclosure. Instead, try to find a home inspector who is truly qualified: someone who has many years of experience, who has inspected thousands of properties, who has a reputation for detailed, uncompromising thoroughness. A top-gun home inspector will provide the disclosure you’re seeking, and for once, you’ll know what you’re buying, before you buy it.
• Distributed by Action Coast Publishing. Questions to Barry Stone can be emailed to barry@housedetective.com.