Fact Pattern: You are the buyers’ agent. Your buyers do not want to lose out on yet another property in a multiple offer situation, and so they agree to everything on the seller’s Seller Multiple Counter Offer (SMCO). The SMCO, however, states that the seller will provide the buyers with a Transfer Disclosure Statement (TDS) as required by law, but not the Seller Property Questionnaire (SPQ). The seller accepts your buyers.

Multiple Choice Question: During escrow, is the seller required to provide your buyers with an SPQ? Pick the best answer:

A. Yes, because the seller cannot waive the SPQ requirement.
B. No.
C. No, but the seller is required to provide an Exempt Seller Disclosure (ESD).
D. No, but the seller must disclose if the answer to any of the questions on the first page of the SPQ is “Yes.” 

Answer: Answer A is wrong. As background, the Seller Property Questionnaire (SPQ) is a list of questions drafted by C.A.R. to help sellers provide their buyers with a more comprehensive understanding of the property to be acquired. It is also an excellent tool to help protect agents against potential liability.

A common misconception among agents is that, like the TDS, the SPQ is a legally-mandated disclosure for certain sellers (unless exempt). In truth, the SPQ is not a legally-mandated form. It is merely contractually required under paragraph 10A(4) of the RPA, which this particular seller countered out.

As between the remaining Multiple Choice answers, Answer D is the best answer. Although the SPQ form itself is not a legally-mandated form, either the law or contract requires a seller to disclose “yes” answers to the questions in Section V.A. on the first page of the SPQ. A seller is legally required to disclose “yes” answers to Questions 2, 3, 4, 5, 6, 10, and 11, and contractually required to disclose “yes” answers to Questions 1, 7, 8, and 9.

What Does “Yes Answers” Mean? “Yes” answers mean that the seller’s disclosure obligation only arises if the answer to the question is “yes.” Let’s use Question V.A.2 of the SPQ as an example. If the government has identified a property as contaminated by methamphetamine, the law requires the seller to disclose that fact to the buyer and to give the buyer a copy of the health official’s order. The law, however, does not specifically require the seller to use the SPQ form, nor does it require the seller to answer Question V.A.2. of the SPQ which basically states, “Seller, are you aware of a methamphetamine order — Yes or No?”

Practice Tips: As a buyer’s agent, make sure that, before your buyers agree to the seller’s SMCO, you inform the buyers in writing that it’s against your advice for them to waive the SPQ. You should also give the buyers a copy of a blank SPQ so that they can see all the questions that the seller does not plan to answer. Additionally, during escrow, you can try to get the seller to at least complete the Exempt Seller Disclosure (ESD) (Answer C) by telling the seller’s side that these questions address disclosure issues that are required by law or contract.

-Thank you to Nicki Marcellino (La Jolla Manager) for suggesting this week’s legal tip.

Copyright© 2020 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of July 27, 2020. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.