RELS – Disclosure of Home Inspection & Termite Reports
RE: Disclosure of Home Inspection and Termite Reports
Are agents required to give Buyers all reports, or only the most recent report?
Listing agents often find themselves in possession of multiple Home Inspection and/or Termite Reports for the same property. Sometimes the information in each report is different and the agent is encouraged to conceal the unfavorable report and only turn over the best report.
For example, I was involved in one recent transaction where one Termite Report was clear while the other indicated substantial termite infestation requiring $10,000.00 in remedial repairs. Is the agent entitled to rely upon the clear report, or is the agent required to turn over both reports?
Here is the answer. If more than one Home Inspection and/or Termite Report has been given to the agent, then the agent must give copies of all reports to the Buyer. The agent does NOT have discretion to select which report to give to the Buyer. The agent is a mere conduit for information and must give all reports to the Buyer for his/her analysis.
The leading case on multiple termite reports is Godfrey v. Steinpress Realty, 180 Cal.Rptr. 95 (5th Dist. 1982). In Steinpress Realty, the listing agent was given two Termite Reports. The first Termite Report was from Heaton Pest Control and disclosed “faulty grade level” and minimal “fungi damage”. There was no mention of termites and the recommended repairs were $971.00.
The second Termite Report was from Clark Pest Control and disclosed substantial “termite damage” in the attic and “fungi damage” to portions of the structure. Clark Pest also discovered that a portion of the hallway was bare wood over a dirt floor, instead of concrete.
The agent discussed both the Heaton and Clark Reports with the Seller, but decided to use the Heaton Report only. The agent did not disclose the Clark Report to the Buyer. Buyer closed escrow, discovered termite damage and sued the agent for failure to disclose the Clark Report.
The Court was repulsed by the agent’s concealment and awarded the Buyer $1,800.00 in actual damages (i.e. the cost to repair the termite damage) and $60,000.00 in punitive damages.
In summary, agents must give all reports in their possession to the Buyer or risk a lawsuit.