But We Are. Fix It Before You List It
Recently, one of our Arizona Foundation Solutions employees was house shopping and visited a few Phoenix area Open Houses. A trend began to emerge; they noticed significant wall cracks in the walls of almost all of the houses they toured. In one case, the front door was so out of square it was jammed shut and Open House foot traffic was directed to enter the home via the service porch! In another, questions about cracks in the dry wall were dismissed and redirects were attempted; in another case, attention was diverted to a recent kitchen remodel "did you see the new granite counter tops?!"
In all of these cases the realtors opined that the cracks and door were all cosmetic in nature with no long term consequences.
Real Estate Agents are obligated to follow the commissioner’s rule to be fair in dealing with the other party by telling the truth and sharing information that could be material to a transaction. In real estate, there is a 'Tool and Tuxedo' Rule, which basically says the realtor is not responsible to discover a condition requires a tool to discover it or can’t be done in a tuxedo (like crawling in an attic or crawlspace). Realtors are trained to defer to the experts.
In opining on a crack or other signs of stress on a house, the real estate agent has now crossed the line and have moved to purported 'Expert Status'. Something that none of them would willingly accept if they knew the consequences, because now they are liable for their opinions. Home Inspectors have learned this lesson for the most part, and will usually recommend a foundation expert when they observe signs of stress.
What should realtors do? When observing a sign of stress, they should refrain from opining on its significance or its interpretation and suggest an expert look at the problem, before the Open House. This may not be as disarming for them, however it is the right thing to do for several reasons:
· The realtor really is not an expert and is not trained to analyze, and interpret these kinds of things. They can in fact make serious mistakes.
· The listing agent in particular have conflicts of interest in characterizing signs of stress.
· They take on liability to themselves and their broker.
· They lose all credibility if their opinion if later they are found to be in error. This makes navigating afterwards to save the transaction much more difficult.
In order to preserve a transaction, the realtor has several tools to help:
· If they are the listing agent, proactively get a foundation inspection before a transaction is started.
· They can put a 2 week hold clause into every contract. If signs of stress are suggested by the home inspector, they get an automatic extension to investigate and get results.
· If foundation inspections recommend repairs, negotiate a contract to withhold appropriate money from the transaction so that the closing can proceed while repairs can be done after the closing.
· Learn to negotiate a compromise… a fair agreement that both buyer and seller and accept. Having an objective engineered report that everyone can believe in is critical.
· Make sure the lender is on board to facilitate the hold on the funding.
Navigating foundation issues are difficult require training and perseverance on the realtors part. Its better than the alternative. The risks associated with having unhappy clients or the other parties to the transaction along with the accompanying lawsuits.
