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“Trust but verify” is a Russian
proverb made famous by former US President Ronald Reagan. In a typical real
estate transaction, a great deal of information is exchanged. When should a party “trust” and when should a
party “verify”?
The Arizona Department of Real Estate (ADRE) Commissioner’s
Rule A.A.C R4-28-1101(I)
requires that a real estate agent take reasonable steps to assist a client in
verifying the accuracy of information relevant to the transaction.. The rule
also requires reasonable care in obtaining information material to a client’s
interests and relevant to the transaction and that an agent accurately
communicates this information to the client.
The related ADRE Substantive Policy Statement (SPS) SPS 2005.13
clarifies the Commissioner’s Rule and states that an agent is expected to take
reasonable steps to assist their client in verifying information when a
reasonably prudent real estate professional has reason to question the accuracy
of the information being provided, or where the client has questioned the
accuracy of the information.
Thus, the ADRE Commissioner’s Rule and SPS provide guidance
on when a real estate agent should assist their client in verifying
information. For example, if the seller
states that the roof is in excellent condition and only a roof inspector would
have the expertise to determine otherwise, the broker should have no liability
for merely passing along the seller’s representation.
However, if the seller states the roof is new and in
excellent condition, but the agent has reason to believe that the roof is old
and in a state of disrepair, evidenced by broken shingles and obvious water
leaks, the agent should point out these circumstances to the buyer and
recommend that the buyer obtain a professional roof inspection to verify the
roof condition.
Similarly, if the buyer questions the accuracy of the
seller’s representations or other information provided during the transaction,
the same rule applies: the agent should assist the buyer in obtaining
independent verification. In other
words, if the buyer asks about the roof’s condition, the agent should advise
the buyer to have the roof inspected by a roofing expert to verify its
condition.
Further, a listing agent can “trust” information provided by the seller, absent
a “red flag” indicating the information is inaccurate. The court made this clear in Aranki v. RKP Investments, Inc.,194
Ariz. 206, 979 P.2d 534 (App. 1999) when it held that the listing agent was not
liable to the buyers for passing along information from the seller without
proof that the listing broker knew or should have known that the information
might be false. The listing broker had no duty to the buyer to verify the
information provided by the seller because there was no indication that the
information might be inaccurate.
In conclusion, “trust” - but verify if there is any question
or doubt. You can “trust” information
provided in a transaction if there are no “red flags,” but you must assist your
client to “verify” information if you have any reason to doubt its accuracy or
if the client has questions about the information. In addition to referring the buyer to other
professionals to verify information, provide the buyer with the resources such
as the Buyer Advisory, so that the buyer can take an active
role in the verification of information provided about the property being
purchased.
Michelle Lind is Of
Counsel to the Arizona REALTORS® and the author of Arizona Real Estate: A
Professional’s Guide to Law and Practice. This article is of a general nature and may
not be updated or revised for accuracy as statutory or case law changes following
the date of first publication. Further, this article reflects only the opinion
of the author, is not intended as definitive legal advice and you should not
act upon it without seeking independent legal counsel. 8/25/22
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