Legal FAQs for REALTORS®
— Disclosures Other Than Agency
Prior Inspection Reports
The initial buyer's inspector contacted the seller and stated that neither the seller nor the seller's broker can provide a copy of the inspection report to a buyer who has not paid for the report. Is the seller or the seller's broker ever prohibited from providing a copy of an inspection report to a subsequent purchaser? (updated Sept. 24, 2010)
A seller or seller's broker is only prohibited from sharing a copy of an inspection report with a subsequent buyer if the seller or the seller's broker is the client of the inspector (i.e., the seller or the seller's broker ordered the inspection) and the seller or seller's broker signed an agreement prohibiting the seller or broker from sharing the report. While an inspector is obliged to answer only to the inspector's client and is under no obligation to speak with any other person about the content of the inspector's report, the inspector's report should stand on its own. The inspector's opinion as to the condition of the property as of the date specified in a report does not change based upon who reads the report. Most inspectors know that a client will use the inspection report to negotiate repairs in a transaction and that the client may need to provide a copy of the report to the other party. This is the nature of the industry that gives rise to the demand for the inspector's business. Most inspectors do not require that their clients sign confidentiality agreements prohibiting the client from sharing the report with others. Even if an inspector has a client sign a confidentiality agreement that limits the client's right to copy and distribute the report, that agreement is binding only upon the client and not upon any other person who may receive a copy of the report.
Let's say the buyer in the above scenario chose to terminate the contract. What obligations does the seller have to subsequent buyers to disclose information in the prior inspection report the seller disagrees with? (updated Sept. 24, 2010)
A broker or seller who receives an inspection report is charged with knowledge of the information in the report. This is true even if the broker or seller does not open the report or disagrees with the information contained in the report. If an inspection report reveals material defects, the seller and the broker are obliged to disclose those defects to subsequent potential buyers. The seller and broker may choose to disclose the defects orally, but that may be imprudent since no record of the disclosure would exist; summarize the defects in some written communication to the subsequent purchaser, but that may create a risk that some important information may be edited out. The seller and broker should provide a copy of the report to the subsequent potential purchaser along with the seller's disclosure notice, thereby providing all of the information the seller and broker have with regard to any know defects. If the seller strongly believes the information in the inspection report is incorrect, the seller could have another inspection performed. If this is done, the seller should provide both reports to subsequent buyers. The TAR Seller's Disclosure Notice (TAR 1406) asks the seller to identify and attach copies of previous inspection reports. TAR's notice cautions the buyer against relying on previous reports as a reflection of the current condition of property and suggests that the buyer employ an inspector of the buyer's choice to inspect the property.
My seller client disagrees with the buyer’s inspector’s finding that an item needs to be repaired. Does a seller have to make the repairs requested by a buyer? (Updated Aug. 4, 2014)
No. There is no requirement for a seller to make any repairs. However, a seller who rejects any repair amendment or refuses to negotiate any repairs risks the buyer terminating the contract if the buyer has an unrestricted right to terminate the contract and is within the termination-option period.
To avoid this situation, a seller who disagrees with an inspection report provided by a buyer could consider hiring another inspector to inspect the property or the items in dispute in an effort to continue negotiating with that buyer.
On behalf of my buyer, I attached the inspection report the buyer paid for to an amendment for repairs and submitted that to the seller's agent. The seller and the seller's agent refused to open the report or negotiate for any repairs. What can the buyer do in this situation? (updated Sept. 24, 2010)
A broker or seller who receives an inspection report is charged with knowledge of the information in the report even if the broker or seller does not open the report. While sellers and listing agents should review inspection reports they receive on the property, a buyer and/or buyer's representative can't force them to do that. Additionally, there is no requirement that sellers agree to or even consider amendments requiring the seller to perform repairs to the property. Buyers should have inspections performed and negotiate any repairs during the buyer's option period. If the buyer is not satisfied with the information in the inspection report or cannot get the seller to agree to requested repairs, the buyer can exercise his right to terminate the contract.
My buyer client is on day four of his 10-day termination-option period. I sent a copy of his inspection report to the listing agent along with an amendment for repairs, but the listing agent told us that his client refuses to open the report or negotiate for any repairs. What can my buyer do? (Updated Nov. 12, 2014)
If the buyer is not satisfied with the information in the inspection report or cannot get the seller to agree to requested repairs, the buyer can exercise his right to terminate the contract before his option period ends.
A broker or seller who receives an inspection report is charged with knowledge of the information in the report even if the broker or seller does not open the report. While sellers and listing agents should review inspection reports they receive on the property, a buyer or buyer’s representative can't force them to review the reports. There is also no requirement that sellers agree to or even consider amendments requiring the seller to perform repairs to the property.
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