Monday, November 16, 2009

Can Las Vegas Foreclosure Listing Agents Avoid Disclosure

Here is a letter recently sent to us by Paul Donohue of Spectrum Inspections, one of the leading home inspection companies in the Las Vegas Valley. As usual, Paul keeps us informed of ongoing inspection issues that we, as Las Vegas real estate agents, need to be aware of. Paul sent us the information below just this past week which raises an interesting question: What responsibility do REO listing agents have to disclose defects that they are aware of?


Recently REO agents have been hiding behind the "as is, where is" clauses inserted by sellers (banks) into their contracts. But this does NOT relieve them of responsibility to disclose anything they know about a Las Vegas home for sale that they have listed.


Excerpt from Paul's letter:

No Disclosure

We were recently involved in an inspection on a Las Vegas home in foreclosure where the Selling Agent and buyers were very worried about mold. They had somehow gained entry into the home before it was "officially" on the market and observed an extensive amount of water damage and mold. But the Listing Agent, through the Asset Manager, had the damage repaired and mold remediation performed before the home was placed on the market. When the Selling Agent inquired about the damage the Listing Agent informed her that the home was being sold "AS-IS" and that there was no SRPD being provided. No disclosures about the property condition were going to be provided. They had an accepted offer to purchase contract in place.


The SRPD is the Sellers Real Property Disclosure Statement. True enough, especially with a fully signed NRS 113 waiver in place, the bank who owns the home is not required to make any disclosures about the material condition of the home.


But in this case it was the Listing Agent who arranged and coordinated the repairs that were accomplished. Forget about the SRPD, think about the "Duties Owed" The DUTIES OWED BY A NEVADA REAL ESTATE LICENSEE specifically states: Licensee's Duties Owed to All Parties:A Nevada real estate licensee shall:1. Not deal with any party to a real estate transaction in a manner which is deceitful, fraudulent or dishonest.2. Exercise reasonable skill and care with respect to all parties to the real estate transaction.3. Disclose to each party to the real estate transaction as soon as practicable:a. Any material and relevant facts, data or information which licensee knows, or with reasonable care and diligence the licensee should know, about the property.b. Each source from which licensee will receive compensation.4. Abide by all other duties, responsibilities and obligations required of the licensee in law or regulations.

Our inspection revealed that the home was plumbed with Kitec® plumbing and that a plumbing system leak was the cause for all the previous water damage the home had sustained. The leak and the damage had been repaired but the issue that caused the damage (Kitec® plumbing) still existed in the home.


This particular home was a Woodside Home. Woodside is currently in bankruptcy and no Kitec® replacement actions are going to happen on any Woodside homes until the bankruptcy is completed. If or when the buyers move into this home and then happen to develop mold related health issues do you think that the Listing Agent is going to be immune from litigation?


I am not an attorney and as such I do not provide legal advice. But as is the case with most home inspectors I always am cognizant of the potential liability that may exist in any inspection situation. There is no doubt in my mind that unless the Kitec® in this home is replaced, and replaced soon, there will be other water intrusion issues occurring and further water damage is imminent. And when the homeowner is unable to obtain relief from the Kitec® class action lawsuit they will be looking for other ways to obtain remuneration for the repair and replacement expenses they will have incurred. The buyers are already questioning the responsibility of the Listing Agent to provide the disclosure they seek. Once they lament to an attorney that the Listing Agent was aware that previous damage existed and failed to disclose any information about the issue it seems to me that it is very possible that the Listing Agent could be held liable and end up in court.

Las Vegas home inspectors are licensed by the Nevada Real Estate Division, just like real estate sales people and our guiding regulations NAC 645D.460, which outlines professional conduct, states: A certified inspector shall:1. Perform his duties with the highest standard of integrity, professionalism and fidelity to the public and the client, with fairness and impartiality to all. In light of the information we possess and in consideration of our responsibility to the standards that we are required to observe should we advise the Listing Agent of the potential liability that exists?

I would appreciate your input so that I may decide how to act upon this issue. And thank you for your time. Paul J. Donohue, RHI, RREI, CREIPresident, Spectrum Inspection Group Inc.8345 Coyado Street Las Vegas, NV 89123Phone: (702) 269-6716Web: http://www.inspectlv.com/

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