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Buyer Questionnaires, Electronic Communications, and Discrepancies Between the MLS and Property Profiles

Thanks to all of you who responded to my last article on whether a buyer’s questionnaire might be used to assist real estate licensees in learning those material facts that might impact a client’s decisions. Many of you were interested in seeing a proposed questionnaire; however, until the concept of a questionnaire is one that is analyzed and approved, at a minimum, by the PRDS Forms Committee, introducing even a draft version of such a questionnaire is premature.

The Supreme Court’s decision in Horiike has, among other things, caused a reassessment of what real estate licensees must do to meet their fiduciary duties for a client. One of the purposes of my article was to prompt licensees to think about how they will meet their fiduciary obligation, including learning material facts that might impact a client’s decision. The primary point at this time is to recognize that a fiduciary obligation includes learning material facts, that material facts may include more than a client’s needs and wants, what other factors exist that impact whether fiduciary obligation has been met, and what potential resources may exist to assist in attempting to meet that obligation.

Over the last month, several issues have been the subject of claims that I have been handling, which I thought were worth mentioning. The first concerns statements made in emails, text messages, or in transaction documents. These statements may be made to your client or another agent. Such statements may address the status of the transaction or express a legal position regarding that transaction – e.g., that a party is in or out of contract or in breach of contract, that a party is canceling and stating the basis for that cancellation, that a party has committed fraud, that a standard of care or fiduciary obligation has been breached, or express an opinion that undertaking a certain task or how that task should be approached is unnecessary, burdensome, or otherwise inconvenient, etc.

There are several potential issues with such statements. First, anything prepared for or presented to a client, whether or not they signed it, and communications to the client or another agent about a transaction should be preserved as part of a transaction file. Second, any such communications are not going to be privileged and will therefore be admissible in evidence in any legal dispute. Third, expressing an opinion regarding the transaction (e.g., attempting to justify a cancellation on the grounds that the seller has committed fraud, cancelling a transaction for a stated reason when other reasons exist, or cancelling a transaction for a stated reason when grounds existed to cancel based on nonperformance of the other party that could have been addressed by a Notice to Perform) may limit or adversely impact the ability of your client, and your client’s attorney, to rely on other grounds or legal arguments because that opinion has committed the client to a factual and/or legal position. Fourth, are you qualified to express such an opinion? Fifth, consider the consequences of expressing opinions about the standard of care or fiduciary duties (including what may or may not be required of sellers or other agents) and how those opinions may reflect upon what you as a licensee have done or not done in the transaction. This concern can be even greater in the case of a dual agency, because you have then expressed an opinion about a licensee subject to supervision by the same broker. Sixth, if your statements are incorrect or express an attitude about how you or your client should approach an activity (such as the disclosure obligation), consider how such statements will be viewed in the event of a dispute.

This discussion is meant to be illustrative, not exhaustive. Generally, remember that what you say in writing, when you say it, how you say it, and whether there are other actions that could have been taken can have an impact on both you and your client in the event of a dispute.

Another issue I encountered on two occasions this past month involved information published in the MLS regarding bedroom and bath counts and how that information was reflected in a property profile. In one instance, the bedroom and bath count in the property profile was consistent with the count set forth in the MLS but was based upon information from the Tax Assessor’s office rather than on the Planning or Building Departments. The agent made the assumption that because the information came from the Tax Assessor’s office, that meant that the bedrooms and bathrooms were all legally permitted, including from the perspective of the Planning and Building Departments. This is not always the case. The tax assessor assesses property solely for purposes of tax collection. The takeaway on this point is to not make the same assumption and, where appropriate, make the necessary inquiry or evaluation with the Planning and Building Departments.

This issue also arose in a situation where the information in the property profile regarding bedroom and bath count was inconsistent with what was disseminated on the MLS. Unfortunately, the agent failed to note the discrepancy and thus did not make any inquiry or evaluation regarding it. The property profile was accurate, rather than the MLS listing, resulting in a claim regarding the cost and expense of legalizing the unpermitted space.

One thing to remember about attempting to legalize any unpermitted space is the state laws passed last year regarding Accessory Dwelling Units (ADUs). The laws were passed, in part, to attempt to alleviate housing shortages, and the statewide rules and regulations regarding ADUs may assist in any legalization process if the unpermitted space, among other things, meets the definition of an ADU. Just remember that legalizing or obtaining a permit for any space requires the approval of multiple departments, including Planning, Zoning, Building, Environmental Health, Fire, and others. Also, if you or your client need assistance regarding permits or the permitting process, land-use consultants are individuals who are qualified to assist in this area. If you don’t know of a good land-use consultant in the area where the property is located, you can always contact the Planning/Zoning Department in that jurisdiction and ask if a former planner from that jurisdiction is now doing private consulting.