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/

Will Deed for Lease Program Slow Las Vegas Foreclosures?

For Las Vegas home owners who have been unable to qualify for a loan modification and are facing foreclosure, a new Fannie Mae program would at least allow them to stay in their homes for up to a year if they are willing to sign over their homes to the bank on a deed in lieu of foreclosure. The bank would then lease the house back to the borrower at current market rate for up to a year. After the initial lease period expires, there's the possibility that the bank would extend the lease on a month to month basis.

The program, called Deed for Lease, is designed to help stabilize neighborhoods and reduce the amount of foreclosures on the market. Foreclosures in Las Vegas have been among the highest in the country. Many neighborhoods built during the boom period were bought out by investors and currently stand half vacant. According to Dean Baker, co-director of the Center for Economic and Policy Research, "Families that like their home, their neighborhood, or the schools for their children will have the opportunity to stay in their house even after foreclosure. This is also good policy for neighborhoods that have been hard-hit by foreclosures. The Deed for Lease Program will keep the homes occupied rather than being an eyesore and a potential safety hazard."

To qualify for the deed for lease program, the home must be the borrower's primary place of residence. A borrower-turned-tenant must be able to prove that the market rental payment is no more than 31% of his gross income. Any subordinate lien holders (second trust deeds, judgments, etc.) must agree to release those liens in full. For most homeowners, the rental payment will be far lower than the mortgage payments they were making.

The Las Vegas real estate market would seem ideally positioned for this new program. There are even rumors that in the future Fannie Mae would seek to sell the homes back to owner/tenants. Current short sale guidelines prohibit more affluent friends or family members from purchasing a borrower’s home in the hopes that one day they would be able to buy them back. Banks could gain from potential appreciation over the next few years, rather than going through the expense of the foreclosure process and low prices now.

Existing Homeowners Happy about Extended Tax Credits!

Las Vegas real estate agents and homeowners alike are celebrating the news! It looks like the first time home buyer tax credit will be extended through April 30th of 2010, and more buyers than ever before are now eligible to take advantage of the new credit guidelines. Income caps have been raised from $75,000 to $125,000 for individuals, and from $150,000 to $225,000 for couples. In addition, move up homeowners are going to get a piece of the pie as well. Any homeowner who has owned his home longer than five years can get up to a $6500 credit on the purchase of a new principal residence. (The credit is available for the purchase of principal homes costing less $800,000, and vacation homes do not qualify for the credit.) Homebuyers who qualify must stay in their new homes for at least three years, or they will have to repay the credit.

So what does that mean for the local market? The inventory of Las Vegas homes for sale has already dwindled dramatically in the third quarter of 2009, with less than 8,500 single family homes on the market at the end of October, down from a high of over 25,000 in October of 2007. Price decreases of more than 50% in the market lured investors back into circulation during 2009, and first time homebuyers, squeezed out during the boom, took advantage of affordable pricing. Competition for Las Vegas foreclosures has been fierce, with multiple offers submitted on properties under $250,000. (One property received a record 75 offers in less than three days on the market!)

One of the most frustrating aspects of the market during the past year, for both buyers and agents, has been trying to get an offer accepted. With more than 80% of the properties for sale being either bank owned foreclosures or short sales, the process has been arduous to say the least. Many buyers on short sales have waited over 6 months waiting for bank approval only to have the short sale package denied or to find out that the bank had foreclosed on it, even though there was a valid contract in escrow. And in some cases the sellers have “disappeared” prior to closing since they are getting no money out of the sale. Most buyers have had to put in more than a dozen offers on properties before finally getting one accepted. Plus the banks are writing all the rules. Negotiators are requiring full preapprovals from Las Vegas mortgage lenders before they will even consider an offer. And buyers are taking homes in “as is, where is” condition with no repairs made and no warranties or recourse against the sellers.

With any luck the new tax credit for move up buyers will stimulate “real sellers” to put their existing homes on the market. They will be pleasantly surprised to find that they are able to command more money for their homes than the bank repos and short sales, as frustrated agents and buyers will be zeroing in quickly to claim a “normal” transaction without all the headaches and hoops of the repos and short sales. Higher sales prices for homes should stabilize the market as well, and may even lead to increases by the time spring buying season rolls around. So break out the champagne and the paint brushes!