Thursday, September 21, 2006
New Arizona Disclosure Reports Reduce Seller & Agent Liability
Arizona Revised Statute 33-423, which became law today, reduces liability for property owners when they sell their home or other real property. The new law (a.k.a. H.B. 2779) allows sellers and their listing agents to avoid liability for certain disclosures if they provide the buyer with a disclosure report prepared by a third-party. The new law basically requires the third-party provider to accept liability for any errors, inaccuracy or omission in the disclosure report. In order to qualify, the third-party reports must be based on officially adopted governmental maps that disclose whether or not the property is subject to any of the following conditions:
When originally drafted, the legislation required the use of third-party disclosure reports. However, that idea was quickly rejected by the Arizona Association of Realtors® (AAR), and therefore, the reports are optional under the new law.
As a Realtor®, I don't know why anybody would not want to use a third-party disclosure report. For less than $100, the liability of the seller and seller's agent is greatly reduced. Of course, the seller or agent will still have liability if they're aware of information not disclosed in the report, and fail to disclose that information themselves. But most of the information addressed in the third-party disclosure report is stuff the seller usually doesn't know anyway.
Generally, sellers use AAR's Seller's Property Disclosure Statement (SPDS) to disclose what they know about their home to the buyer. This form used to be only a few pages long, but a few years ago, AAR revised the SPDS to 7 pages. They also took away the "Don't know" option so that sellers must now answer each question with a definitive "Yes" or "No". I know many real estate agents who used to advise their clients to answer "Don't Know" to anything they were not absolutely positive about, to protect the seller against (accidental) false disclosures. I think that's why they took the "Don't Know" option away - because it got to the point where many sellers answered "Don't Know" to just about everything, making the disclosure statement somewhat useless. But forcing sellers to answer either "Yes" or "No" leaves many sellers guessing on questions they aren't sure about.
But now, sellers don't have to guess and risk liability for false disclosure. By obtaining a third-party disclosure report, the seller can be confident they are accurately disclosing required information. I would not usually expect the information revealed in these reports to be a 'deal-breaker', but if so, it's ALWAYS best for everyone involved that the buyer learn negative information about the property before closing.
These environmental disclosure reports have been used by investors and in commercial real estate transactions for many years. Once sellers and listing agents realize the ease and practicality of obtaining third-party disclosure reports, I imagine they will become a routine part of most Arizona real estate transactions. In fact, I personally think Buyer's Agents should be asking for a third-party disclosure report in their offer to ensure the seller provides one. At less than $100, most sellers should agree to it, especially when they realize it protects them. If the seller doesn't provide the third-party disclosure report, I would strongly urge buyers to buy a disclosure report themselves. Even those buying brand new homes should consider buying a disclosure report, as I doubt if many builders will provide them.
Homewerx Home Inspections will be offering the new Arizona Disclosure Reports in cooperation with Environmental Data Resources, Inc. (EDR). You may call (480) 503-2611, or visit HomeInspectionBlog.com for more information.
Posted by Shannon Hubbard, AZ Realtor & Computer Guru on September 21, 2006 | Permalink
Does this disclosure report replace the sellers property disclosure statement?
Posted by: Jerry | Sep 29, 2006 10:41:51 AM
Hi Jerry - No this disclosure report does NOT replace the Seller's Property Disclosure Statement (SPDS) or other disclosures the seller is required to make! The information in the new AZ disclosure reports contains information in 9 areas (listed in post above) that sellers don't usually know much about. By obtaining one of the new third-party disclosure reports, Arizona sellers are not liable for errors or ommissions in the disclosure report, unless they know the report to be incorrect and fail to disclose the correct information. So the liability for the disclosure of those 9 items is shifted from the seller/agent to the third-party provider of the disclosure report. Thank you for your comment!
Posted by: Shannon Hubbard | Sep 29, 2006 11:05:45 AM
By the way, you can see a sample of the new Arizona Disclosure Reports at the link below. There is a standard Arizona Disclosure Report and a 'deluxe' version called the Neighborhood Environmental Report.
(Sorry, you'll have to copy and paste the link since links are disabled in the comments!)
Posted by: Shannon Hubbard | Sep 29, 2006 11:30:20 AM
Is an Arizona disclosure report the same as an Arizona real estate hazard disclosure report as provided for in AZ House Bill 2779? I think HB 2779 became Arizona Revised Statute 33-423 which is quoted in this article, so these two reports are the same thing. Is that true?
Posted by: David R. | Oct 24, 2006 10:03:51 AM
I was told to make sure and get my Arizona disclosure report from an EDR-Certified Inspector. Does Homewerx Home Inspections have EDR-Certified Inspectors?
Posted by: Harriet O. | Oct 30, 2006 10:44:59 PM
Hi Harriet. Yes, if you order an Arizona Disclosure Report or Neighborhood Environmental Report from Homewerx Home Inspections, it is prepared by an EDR Certified Home Inspector.
Posted by: Shannon Hubbard | Oct 31, 2006 8:01:56 AM
As VP of Government Affairs for the Arizona Association of REALTORS I found the comments about HB 2779 and the positions taken by RAPAC interesting. As the writer of the information quoted on this blog, I wanted to share a little more information with you and your viewers.
HB 2779 is a piece of legislation that from the moment the law became effect has seen more than its fair share of inaccurate marketing efforts. These marketing efforts have included flyers, sales pitches, emails, "regulatory compliance memos" and more stating that REALTORS® and their clients must comply with HB 2779 or that it is mandatory to purchase a third-party disclosure report. This is simply not true as the new law allows a seller to authorize a third party to perform a very basic report based on governmental maps on a very limited number of subjects. Some of those disclosures are already done for buyers as part of the real estate transaction process (special taxing districts, military training routes and flood zones). Other items covered by the legislation don't have current maps completed yet like earth fissures. I know because I ran the legislation this year to provide the governmental agencies funding to get those maps updated and in a usable form. Expansive soil maps only show Metropolitan Phoenix and Tucson and are not detailed enough for specific parcel disclosure. Others issues like public and private airports are being done by disclosing properties that are within a 2-mile radius of the airport instead of using noise contour studies as required with military airports. Noise from public or private airports may very well require disclosure greater than a 2-mile radius as described to me by some of the companies offering these reports for sale.
As far as why RAPAC did not take positions on all 19 ballot measures is quite simple. RAPAC and the Arizona Association of REALTORS focus on issues that impact real estate and our members. Propositions 101, 104, 105, 106, 207 and 302 all have an impact on our members and their clients. That is why those ballot measures had recommended positions listed in our RAPAC Voter’s Guide.
Hope this post helps share a little more information on these two areas.
Posted by: Tom Farley | Nov 21, 2006 8:38:01 PM
I purchased a home 1/9/09, It came with a discloser report
Julie Hecht ,
Posted by: Julie Hecht | Feb 3, 2010 11:04:06 PM
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