Three Threats Result in Successful Initiatives Benefiting Arizona Real Estate

 

Did you know that certain states require that an attorney be retained in a real estate transaction?  Are you aware that some states have a tax on the transfer of real estate, usually based on the price of the home being sold?  Or that other states have a professional services tax, which is a direct tax on real estate commissions and other real estate services?  These types of fees and taxes adversely affect the affordability of real estate. 

Arizona has faced such threats to the real estate industry.  And the Arizona REALTORS® has responded to these threats by successfully using ballot initiatives.  Running a ballot initiative is a costly and complex task that demands a tremendous amount of work.  Valid signatures from 15% of qualified electors are required to place an initiative proposing a constitutional amendment on the ballot. Petitions must be circulated to obtain these signatures from eligible voters and those signatures must be verified. Then, the voters must be educated on the issues through media ads and grassroots efforts, such as speaking at town halls and other meetings.  The Arizona REALTORS® did all of this and more. 

 

FACING THE UNAUTHORIZED PRACTICE OF LAW THREAT

In 1962, the Arizona REALTORS® drafted and ran a ballot initiative entitled Proposition 103 with the slogans “Protect Your Pocketbook” and “Protect Your Right to Choose.” Proposition 103 was necessary to overturn an Arizona Supreme Court decision that real estate licensees and title companies were practicing law without a license by preparing purchase contracts and other legal documents.  Arizona REALTORS® 1962-63 President Stewart M. Winter was quoted as saying “[t]his was a moment wherein to be a REALTOR^® gave one a warm glow of pride.”  Despite vigorous opposition by the Arizona State Bar, the voters overwhelmingly approved Prop 103 by a 4-to-1 margin.[1]

 

As a result, the Arizona Constitution contains a clause that states: 

 

Article 26, Section 1.  Powers of real estate broker or salesman

Section 1. Any person holding a valid license as a real estate broker or a real estate salesman regularly issued by the Arizona State Real Estate Department when acting in such capacity as broker or salesman for the parties, or agent for one of the parties to a sale, exchange, or trade, or the renting and leasing of property, shall have the right to draft or fill out and complete, without charge, any and all instruments incident thereto including, but not limited to, preliminary purchase agreements and earnest money receipts, deeds, mortgages, leases, assignments, releases, contracts for sale of realty, and bills of sale.

 

FACING THE REAL ESTATE TRANSFER TAX THREAT

In 2008, the Arizona REALTORS® drafted and ran a ballot initiative entitled Proposition 100 and “Protect Our Homes,” which constitutionally prohibited imposing any new tax, fee, or other assessment on the sale, purchase, or other conveyance of real estate after December 31, 2007. Arizona REALTORS® 2007 Past President Frank Dickens, Chairman of the "Protect Our Homes" initiative, was quoted as explaining that a transfer tax or fee would equate to "double taxation" because homeowners already pay property taxes.  Proposition 100 was approved by the voters by 76.75%.

 As a result, the Arizona Constitution contains a clause that states: 

 Article 9, Section 24. Prohibition of new real property sale or transfer taxes

The state, any county, city, town, municipality or other political subdivision of the state, or any district created by law with authority to impose any tax, fee, stamp requirement or other assessment, shall not impose any new tax, fee, stamp requirement or other assessment, direct or indirect, on the act or privilege of selling, purchasing, granting, assigning, transferring, receiving, or otherwise conveying any interest in real property. This section does not apply to any tax, fee, or other assessment in existence on December 31, 2007.

FACING THE PROFESSIONAL SERVICES TAX THREAT

In 2018, the Arizona REALTORS® drafted and ran a ballot initiative entitled Proposition 126 and “Protect Arizona Taxpayers,” which constitutionally prohibited the state, county, city, town, district, or other political subdivision in Arizona from imposing a new or increased tax on services that was not already in effect on December 31, 2017. Arizona REALTORS® 2018 President Lori Doerfler was quoted as explaining that the “ballot initiative filed over 400,000 petition signatures at the Arizona Secretary of State’s office in support of the Protect Arizona Taxpayers Act because Arizona voters agree we are already taxed enough.”  Proposition 126 was approved by the voters by 64.09%. 

As a result, the Arizona Constitution contains a clause that states: 

 Article 9, Section 25. Prohibition of new or increased taxes on services

The state, any county, city, town, municipal corporation, or other political subdivision of the state, or any district created by law with authority to impose any tax, fee, stamp requirement, or other assessment, shall not impose or increase any sales tax, transaction privilege tax, luxury tax, excise tax, use tax, or any other transaction-based tax, fee, stamp requirement or assessment on the privilege to engage in, or the gross receipts of sales or gross income derived from, any service performed in this state.  This section does not repeal or nullify any tax, fee, stamp requirement, or other assessment in effect on December 31, 2017.

The passage of these initiative Propositions was good for business, good for the people of Arizona, and good for the economic growth of the state.  The Arizona REALTORS® will continue to work to protect private property rights, advocate for balancing laws and regulations that impact both property owners and renters at all levels of government, and address threats to the industry as they arise. For more information, go to: https://www.aaronline.com/voice-at-the-capitol/

 

K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the newly revised book - Arizona Real Estate: A Professional’s Guide to Law and Practice, Fourth Edition, which is available at all major booksellers.

 For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

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.  10/18/23

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[1] The title companies and the State Bar entered a “treaty” regarding document preparation and the unauthorized practice of law in 1977. See Arizona State Bar Committee on Unauthorized Practice of Law Opinion 76-13.

 

4th Edition - Arizona Real Estate: A Professional's Guide to Law and Practice Now Available in E-Book & Paperback

 

The updated and revised 4th Edition of Arizona Real Estate: A Professional's Guide to Law and Practice has been published and is now available on Amazon at Arizona Real Estate: A Professional’s Guide to Law and Practice, Fourth Edition: Lind, K. Michelle: 9798887471235: Amazon.com: Books and at all major booksellers in both paperback and electronic format.  

The book is intended to be a reference for REALTORS^®, other real estate practitioners and attorneys involved in the industry to help address everyday legal and practical real estate issues. My intention is to answer frequently asked questions about Arizona real estate law and the real estate forms provided by the association so those in the industry can better serve their clients and customers. 

If you are new to the industry, my hope is that this book is a helpful resource as you gain experience. If you are a “seasoned” practitioner, my hope is that you can use the book as a reference to answer day-to-day questions. 

There are numerous references to Arizona Association of REALTORS^® forms and contracts throughout the book. Sample copies of all of the forms are available on the Arizona Association of REALTORS^® website www.aaronline.com.  The link to Form Revision Updates is also on the sample forms website page. 

The many references to case law, statutes and rules are included for the attorneys and others who may want to undertake further research on an issue.  The book has been used by real estate educators, attorneys, brokers, and practitioners for answers and guidance since it was first published in 2006. 

I hope that you find the book helpful and worthwhile.

Thank you!

I Made a Referral – Am I Liable For any Resulting Negligence?

 

If a professional fails to exercise reasonable care in referring a competent individual to a client, the professional could be held liable for any resulting damages. Although the Arizona courts have yet to specifically address the issue of negligent referrals, support for such a cause of action can be found in case law of other states.

Many negligent referral cases involve lawyers.  In an article published in the Arizona Attorney magazine the author wrote: “. . . you should be aware that there is such a thing as ‘negligent referral,’ in which lawyers have been successfully sued for negligently referring a person to an incompetent or dishonest lawyer. In view of this, you will probably want to make sure that if you refer someone to a lawyer, it is because you have a respect for that lawyer’s competence and effectiveness.” Arizona Attorney, October 2006 43-OCT Ariz. Att'y 10 David D. Dodge (citing I Mallen & Smith, Legal Malpractice § 5.9 (2005)). 

The same advice applies in the real estate context.  In Thomson v. McGinnis, 465 S.E. 2d 922 (W.Va. 1995), a West Virginia court found that a real estate broker may be liable to a buyer for negligent selection and retention of an inspector. In this case, the broker hired an inspector to inspect the heating system of a house. Unfortunately, the inspector hired by the broker was not certified to work on heating systems. The “inspection” consisted only of listening to the furnace while it was running, after which the inspector signed a certification stating the furnace functioned properly. Having received the certification, the buyer purchased the home. After the close of escrow, the buyer discovered that the furnace did not function properly. A certified technician informed the buyer that the furnace had many problems and was unsafe to operate. The buyer then sued the inspector and the broker who had hired the inspector.

The broker argued that she could not be held liable for the actions of the inspector. However, the court stated that the broker may have been negligent in hiring the inspector, who was not certified to inspect heating equipment. The court stated:

While a real estate broker bears no responsibility to conduct an independent investigation of a latent defect, when such broker volunteers to secure an inspection of the premises, or some part thereof, by retaining on behalf of the buyer a third party to conduct the inspection, then that real estate broker may be held liable to the buyer for civil damages if the broker in retaining said third party is negligent in the selection and retention of the third party and if such negligence proximately causes harm to the buyer.

Thus, in making real estate related referrals, a broker should consider:

·        providing the client with more than one referral option, when possible,

·         insisting that the client determine which individual should be hired,

·         encouraging the client to inquire as to the qualifications of the individual and, if applicable, determining whether the individual has errors and omissions liability insurance coverage,

·         not directly hiring any person or business on the client’s behalf.

In conclusion, clients expect their brokers to refer or recommend competent individuals to assist in connection with a home purchase.  And generally, when a broker refers a competent person to do work for a client and exercises no supervision or control over the work, the broker should have no liability even if the person acts negligently.  

 

K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the book - Arizona Real Estate: A Professional's Guide to Law and Practice (3rd Ed.).  Watch for the Fourth Edition, which should be available soon. 

 For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

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.  9/22/23

 

Agency - The First Question that a Lawyer is Going to Ask

Clearly defining the agency relationships in a real estate transaction is important for both the clients and the brokers/salespersons (“broker”). Brokers must be clear about who they represent in a transaction to determine what duties are owed to which party. Agency relationships become extremely important if a dispute arises – the first question that a lawyer will likely ask a broker when a claim is filed is “who did you represent?”

 Agency Relationship between the Broker and Client

Agency is a relationship in which one person (the agent) is authorized to represent the interests of another (the client) in business dealings with third parties. By the early 1900s, the Arizona courts recognized the agency relationship between the broker and client in a real estate transaction.  By 1950, the Arizona courts overwhelmingly held that a real estate broker is an agent with fiduciary duties to their client. An agent has fiduciary duties to the client, such as confidentiality, accounting, reasonable care, loyalty, obedience, advocacy, and disclosure.

 Creating an Agency Relationship

An agency relationship is created by consent. An agency relationship may be created by express consent, or it may be implied by the conduct of the parties; no formal agreement is necessary. A broker simply must agree to represent the interests of the client, who consents to the representation and delegates authority to the broker to act on the client’s behalf. Compensation does not establish an agency relationship. Arizona courts have consistently recognized that a broker may represent one party in a transaction but be paid by the other.

 Agency Duties

Many states have enacted agency legislation that attempts to specifically list a broker’s duties to a client and non-client. Arizona has enacted no such legislation, however the Arizona Department of Real Estate Commissioner’s Rules do address a broker’s duties, so it is important to become familiar with A.A.C. R4-28-1101.

The Arizona Association of REALTORS® (“AAR”) Real Estate Agency Disclosure and Election (READE)(10/22) form is designed to assist brokers in defining and establishing agency relationships. Additionally, the use of this form will prevent undisclosed dual agency.

The READE form is not an employment agreement, but a disclosure and election of the agency relationship that a buyer or seller will have with the broker in the transaction. As the READE form makes clear, regardless of whom the broker represents in the transaction, the broker will exercise reasonable skill and care in the performance of the broker’s duties. Further, the broker is obligated to be honest and truthful to both parties and disclose all known facts that materially and adversely affect the consideration to be paid by any party. Additionally, the stigmatized property notice is included in the READE form to alert buyers that information regarding certain “stigmatized” property is not required to be disclosed.

The READE form explains the fiduciary duties a broker owes when representing a buyer or seller exclusively, such as loyalty, obedience, disclosure, confidentiality, and accounting. The form also notifies the buyer or seller that the broker may represent others interested in buying or selling the same or similar properties.

The READE form introduces the concept of dual agency (limited representation). The form discloses that, in the case of dual agency, there will be conflicts and that disclosure of confidential information will be made only with written authorization.

Dual Agency (Limited Representation)

Dual Agency (limited representation) occurs when one broker individually, or two salespeople within the same brokerage firm, represent both the buyer and the seller in a real estate transaction. Dual agency is lawful with prior written consent.

The AAR Consent to Limited Representation (12/02) form should be used to obtain the consent of the parties in a dual agency situation.  This form explains dual agency to the buyer and the seller prior to obtaining the parties consent to the relationship.

In general, a dual agent must do the following. 

• Exercise reasonable skill and care in the performance of the agent’s duties.
• Deal honestly with both buyer and seller.
• Disclose (in writing) to both buyer and seller:

·         any information that the seller is or may be unable to perform;

·         any information that the buyer is or may be unable to perform;

·         any material defect existing in the property being transferred; and

·         the possible existence of a lien or encumbrance on the property being transferred. See R4-28-1101(B).

In general, a dual agent must not do the following.  

·            Advocate or negotiate on behalf of either the buyer or the seller.

·            Disclose any confidential information that would place one party at an advantage over the other party (without the informed consent of the other party), such as:

o   the buyer is willing to pay more than the price offered;

o   the seller is willing to accept less than the listing price;

o   a party will agree to financing terms other than those offered;

o   the repairs or improvements that a seller is willing to make or that the buyer is willing to forego; and/or

o   the confidential motivating factors of either party.

Termination of an Agency Relationship

After termination of an agency relationship, the fiduciary duty is ended. However, confidential information must remain confidential after the termination of the relationship. NAR Code of Ethics, Standard of Practice 1-9 imposes a similar obligation to preserve confidential information provided by clients in the course of an agency relationship after the relationship is terminated.  Confidential information should not be revealed, used to the disadvantage of the client, or used to the advantage of the REALTOR® or other third parties. 

Who Did You Represent?

In the event of a dispute or claim, who a broker represented will establish the broker’s duties and ultimately the broker’s liability.  For example, in Aranki v. RKP Investments, 194 Ariz. 206, 979 P.2d 534 (App. 1999) the Court recognized the “important distinctions between the claims” by a buyer against a seller's agent (where no fiduciary duty is owed) and by a buyer against the buyer's agent (where a fiduciary duty is owed).  In a 2015 real estate malpractice lawsuit, the Court quoted the law as set forth in the Aranki case when discussing a broker’s duty to the client versus a broker’s duty to a non-client.  See, The Buyer's Questions - Real Estate Tales From the Courtroom.  And, to read about a case involving the duties of a dual agent, see  The Sex Offender Next Door - Real Estate Tales From the Courtroom.

That is why the first question that a lawyer will likely ask a broker when a claim is filed is “who did you represent?”

 

K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the book - Arizona Real Estate: A Professional's Guide to Law and Practice (3rd Ed.).  Watch for the Fourth Edition, which should be available soon. 

 For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

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.  9/5/23

Top Ten Reasons to Use the Buyer Broker Exclusive Employment Agreement

 

When a seller signs a listing agreement, the seller understands how much they are going to pay for the broker’s service.  In contrast, most buyers do not understand the MLS offer of compensation or the concept of procuring cause.  The Arizona REALTORS® Buyer Broker Exclusive Employment Agreement (“Buyer Broker Agreement”) can be used to address this issue and has many other benefits. 

Here are my top ten benefits of using the Arizona REALTORS® Buyer Broker Agreement.

1.       Sets forth how the buyer’s broker is to be compensated for their services.

2.      Assures that the broker will be compensated the agreed upon amount if the buyer purchases a property during the term of the Buyer Broker Agreement.  

 3.      With the understanding of how compensation works, the buyer agrees to work exclusively with the broker and be accompanied by the broker on the buyer’s first visit to any property. The buyer acknowledges that the broker may not be compensated by the builder, seller or seller’s agent if the broker does not accompany the buyer on the first visit to a model home, new home/lot, or “open house,” which would eliminate any credit against the compensation owed by the buyer to the buyer’s broker. 

 4.      Provides an opportunity to tout the services the buyer will receive.  A buyer broker’s services are so much more than just showing the buyer listings.  The buyer broker will assist and advise the buyer throughout the entire home buying process within the scope of the broker’s expertise and licensing.

 5.      Builds trust with the buyer through education and transparent up-front conversations.

 6.      Obtains the buyer’s agreement to act in good faith, provide the information necessary to acquire the property and conduct any inspections/investigations that the buyer deems material and/or important.

 7.      Protects both the broker and the buyer by avoiding misunderstandings. Managing expectations is an important risk management practice.   

 8.      Assures the buyer’s broker that the buyer is serious about buying a home and assures the buyer that the buyer’s broker is serious about finding them a home and guiding them to close of escrow.

 9.      Satisfies the legal requirement that a buyer’s broker must have a written employment agreement with a buyer to be paid a commission by the buyer. Real estate brokers may sue to recover compensation due under a real estate employment agreement only if there is a written agreement that complies with both the Statute of Frauds, A.R.S. §44-101(7), which requires a written signature of the party to be charged, and the real estate employment agreement statute, A.R.S. §32-2151.02(A), which requires that all real estate employment agreements be signed by all parties to the agreement and:

·         be written in clear and unambiguous language;

·         fully set forth all material terms, including the terms of broker compensation;

·         have a definite duration or expiration date, showing dates of inception and expiration.

1010. Is an enforceable contract that can be helpful in the event of a commission dispute or in a dispute with a buyer. 

Some buyers may be reluctant at first when asked to sign a Buyers Broker Agreement.  View this reluctance as an opportunity to educate the buyer about the value of your services and build trust. As you review the Buyer Broker Agreement, explain your duties and obligations to the buyer and reinforce that you are a professional who follows the NAR Code of Ethics and that the Buyer Broker Agreement ensures the buyer has a dedicated and knowledgeable advocate representing them in the transaction.

For additional information on Buyer Broker Agreements:

NAR Window to the Law:  Benefits of Using a Buyer Representation Agreement

How Buyer Agreements Boost Your Value, Fend Off Claims (nar.realtor)

Avoid a Bad Practice that can Deprive You of a Commission

Hey! That was “My Buyer” and “My Commission!”

Real Estate Tales from the Courtroom: The Buyers’ Broker’s Signature  

 

K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the book - Arizona Real Estate: A Professional's Guide to Law and Practice (3rd Ed.).  Watch for the Fourth Edition, which should be available soon. 

 For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

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.  8/11/23

 

 

Do the Forms Really Matter? Real Estate Tales from the Courtroom

 

This lawsuit involved claims that are not uncommon in the real estate industry.  The Buyer purchased a house in Scottsdale and about a year later claimed to have discovered latent defects with the home’s roof and other moisture related issues. What makes the case interesting is what the courts had to say about the forms used in the transaction. 

The Facts

The Sellers purchased the house two years after it was built and owned it for 26 years.  The Sellers completed a Seller's Property Disclosure (“SPDS”), which the Listing Agent uploaded into the Multiple Listing Service (“MLS”). The “Public Remarks” section of the MLS listing stated: “Second owners of this home, this abode has been lovingly maintained” and “[t]his home has newer A/C units and a roof, which should provide for low maintenance in years to come.”

The Buyer and Sellers entered into a purchase contract for the sale of the home for the price of $432,000.  The Buyer began his inspections and due diligence. 

The Buyer and the Buyer’s Agent attended the home inspection, along with the Sellers.  The Buyer asked about the condition of the roof and expressed concerns about the moisture in the home. The Buyer inquired about a potential leak in the garage roof, which the Seller said, “was taken care of.”  The Buyer climbed on the roof with the inspector to discuss roof issues.  The “Extended Home Inspection Report,” highlighted various roof-related issues and “recommend[ed] monitoring these areas during and after periods of heavy rainfall.”

The Buyer submitted the Buyer's Inspection Notice and Seller's Response (“BINSR”) and sought a credit or repair for roofing and other moisture related issues.  The Sellers responded to the BINSR to “provide Buyer [a] $ 1,000 credit toward [his] closing costs, escrow costs and/or lender fees, in lieu of all repairs on BINSR.” The Buyer accepted the BINSR and the parties signed an addendum to the purchase contract.  The Buyer conducted a final walkthrough and escrow closed. 

The Buyer began renovating the house within a week after escrow closed with extensive repairs and remodeling.  The Buyer claims he discovered roof problems almost a year later, after heavy rainfall caused “paint and caulking ... to peel and crack,” water leaks and mold in the walls and water pooling in front of the home. The Buyer sued all the parties associated with the transaction, except for the home inspector. 

The Seller, Listing Agent and Buyer’s Agent defendants all moved for summary judgment, which the trial court granted, dismissing the Buyer’s claims.  The Buyer appealed the trial court’s decision to the Court of Appeals.

The Court of Appeals Decision

In deciding the Buyer’s claims against the Seller, the Court discussed in detail the language in several of the forms used in the transaction, many of which the Buyer had initialed.        

·         The Purchase Contract:  The Buyer initialed the “BUYER ACKNOWLEDGEMENT” written in bold and all capital letters, where he “recognize[d], acknowledge[d], and agree[d]” that the Listing Agent and Buyer’s Agent “are not qualified, nor licensed, to conduct due diligence with respect to the premises or the surrounding area.”

 o   The provision further “instructed” Buyer to conduct due diligence, which “is beyond the scope of the Broker's expertise and licensing,” and Buyer agreed to expressly release and hold harmless the Listing Agent and Buyer’s Agent “from liability for any defects or conditions that could have been discovered by inspection or investigation.”

 

·         The Buyer Advisory:  The Buyer acknowledged receipt of the Buyer Advisory. The Advisory explained that real estate agents are “generally not qualified to discover defects or evaluate the physical condition” of the house; emphasized the limited duties of Buyer’s Agent to Buyer, which do not include “verifying the accuracy of” the SPDS or MLS listing; warned that Buyer “is responsible for” conducting due diligence prior to purchase; and cautioned that MLS listings are “similar to an advertisement” and Buyer “should verify any important information contained in the MLS.”

 

·         The SPDS:  The Buyer acknowledged receipt of the SPDS with his electronic initials on each page and an electronic signature at the end. In response to questions about roof issues, the Sellers disclosed their awareness of past roof leaks, water damage and roof repairs. The Sellers said the leaks “were identified and corrected” but otherwise, the Sellers were not aware of “any interior wall/ceiling/door/window/floor problems,” “any cracks or settling involving foundation, exterior walls or slabs,” or “any past or present mold growth.” 

 o   The SPDS advised Buyer to verify the disclosures with a professional and specifically directed him to “CONTACT A PROFESSIONAL TO VERIFY THE CONDITION OF THE ROOF.”

o  The SPDS also included an acknowledgement from Buyer “that the information contained herein is based only on the Seller's actual knowledge and is not a warranty of any kind.  Buyer acknowledges Buyer's obligation to investigate any material (important) facts in regard to the Property. Buyer is encouraged to obtain Property inspections by professional independent third parties and to consider obtaining a home warranty protection plan.”

 

·         The BINSR:  The Buyer electronically signed the BINSR, indicating he had “completed all desired [i]nspection[s]” and “verified all information deemed important [from the] MLS or listing information,” and “acknowledg[ing]” the Listing Agent and Buyer’s Agent “assume no responsibility for any deficiencies or errors made” by the inspector and “neither the Seller nor Broker(s) are experts at detecting or repairing physical defects in the Premises.”

 

·         The Final Walkthrough Form:  The Buyer acknowledged with his signature that “the property [is] as represented at the time the purchase contract was accepted by the parties, and any subsequent repairs that were agreed to ... have been completed to the satisfaction of [Buyer].”

Based upon the evidence, the Court found that the Buyer had failed to create a genuine issue of material fact that the Sellers knew about the alleged defects and had misrepresented or concealed them. Further, the Buyer understood he had imperfect information. The Court stated:  

“The undisputed facts indicate that Buyer had notice of roof-related issues from the Sellers and his home inspector, and he was repeatedly advised that he was responsible for conducting due diligence and warned to verify material information (in his counteroffer, the Buyer Advisory, the SPDS and BINSR).

He was instructed to hire a professional roofer, to verify the roof's condition and to further explore roof-related issues. He acknowledged the warnings and verified that he completed all desired inspections. Yet Buyer did not hire a roofer to take a closer look and instead opted to complete the transaction with limited knowledge.” (Emphasis added). 

The Court rejected the Buyer’s assertion that the Sellers “did not completely or truthfully represent the actual condition of the property being sold” due to three affirmative statements from the MLS listing and sales brochure: “lovingly maintained,” “beautifully remodeled,” and “newer A/C units and a roof.” The Court held the “beautifully remodeled” and “lovingly maintained” statements represented mere sales puffery, which is not actionable as fraud or misrepresentation. “These are not concrete representations of fact; they are inexact opinions of an adverb-laden sales pitch.”  Regarding the MLS description of a “newer” roof, the Court found that “newer” is a relative adjective that derives its meaning from comparing two or more items; the term has no concrete meaning standing alone.

In deciding the case against the Listing Agent and the Buyer’s Agent the Court noted that the trial court granted both summary judgment motions based on, among other things, the absence of expert testimony to establish a professional duty and breach of that duty. The Court recognized that expert testimony was indispensable - both to establish the professional standard of care for licensed real estate agents and agencies, and to demonstrate that defendants breached the standard. 

The Court stated that an “expert opinion was especially critical here, where Buyer sued seven different real estate professionals and agencies representing different parties with different interests and different relationships; Buyer has contracts with some and no contracts with others; and he signed various documents, guides and disclosures during the transaction which implicate and address the duties and responsibilities of distinct parties.”

Therefore, the Court upheld the dismissal of the Buyer’s claims against all parties. 

Case Lessons:

• The proper use of the Arizona REALTORS® forms is one of the best risk management practices.
• Always obtain the party’s signature or initials on the forms where prompted.   
• The language in the Arizona REALTORS® forms does matter.

 Seidman v. Weiler

2019 WL 2152666

NOTICE: NOT FOR OFFICIAL PUBLICATION.

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Court of Appeals of Arizona, Division 1.

No. 1 CA-CV 18-0261

FILED 5/16/2019AMENDED PER ORDER FILED 7/8/2019

Review Denied November 19, 2019

K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the book - Arizona Real Estate: A Professional's Guide to Law and Practice (3rd Ed.).  Watch for the Fourth Edition, which should be available soon. 

 For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

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.  8/2/23