Background: In the Legal Tip for the last 2 weeks, we’ve been discussing how a seller is generally obligated to disclose to the buyer any known material fact affecting the property. Yet, sellers sometimes refuse. As the listing agent, that situation places you between that proverbial rock-and-a-hard-place. If you do not disclose, the buyer may eventually come after you and the seller for non-disclosure. If you do disclose, the seller may come after you for breach of your fiduciary duty by failing to abide by the seller’s instruction not to disclose. The only viable solution may be for you to convince the seller to disclose. Here are some pointers to help you convince the seller to disclose: 

1. It’s Not Easy: Probably one of the most important things to remember when you are trying to convince a seller to disclose is that it may not be an easy task. Agents get frustrated when they can’t immediately convince their seller to disclose. If that happens, it might help to remember that even agents within our own company who you would consider to be our “top negotiators” may end up taking a long time, maybe even several days, to convince their sellers to disclose certain matters.

2. Maybe Find Out the Seller’s Rationale: Sometimes when you ask sellers why they don’t want to disclose something, they may tell you that they do not want to discourage the buyer from buying, or from paying a good price. Let those particular sellers know that they are essentially admitting that what they want to conceal from the buyer is a material fact. If disclosing would make a difference to a buyer, the item of disclosure is, by definition, a material fact for the buyer. California law is extremely protective of consumers. Under California law, if a seller sells a property for $1 million without telling the buyer that the seller knows that the roof needs $10,000 in repairs, the seller is essentially perpetrating a $10,000 fraud against the buyer.

3. Try Not to Say “If You Don’t Disclose, I Will Still Have to Disclose”: Some agents like to say to their sellers something to the effect of, “If you don’t disclose, I will still have to disclose.” I personally am not fond of that approach. As the listing agent, your job is to act in the seller’s best interests. Yet, saying “I will still have to disclose,” can easily be interpreted by the seller to mean that you want to put your own self-interest above the seller’s best interest. I don’t see a reason for you to say that.

4. Disclosing Protects the Seller: Instead of saying “I will still have to disclose,” it may be better for you to explain that you are trying to protect the seller from liability. Aside from providing the TDS and other written disclosures, a seller’s general duty to a buyer is to disclose all known material facts affecting the property. Once the seller does that, the buyer should not be able to successfully recover anything against the seller after close of escrow for any previously unknown adverse condition of the property. But if the seller does not fully disclose, the buyer may, after close of escrow, find out about what the seller had concealed. Buyers discover things that were concealed when they talk to their new neighbors, hire a contractor who had previously come out to the property, find evidence of repairs made, or find documents that show that the seller knew about what had not been disclosed. The seller is better off disclosing before close of escrow, rather than giving the buyer an opportunity to go after the seller after close of escrow for something that the seller concealed.

5. Use C.A.R. Forms to Reinforce the Duty to Disclose: The C.A.R. forms are filled with instructions for sellers to disclose known material facts. Try getting sellers to sign C.A.R.’s Disclosure Information Advisory (DIA) upfront when you take the listing. That way, if a disclosure issue eventually arises, you can show the seller that you’ve already explained that the seller should disclose. The instruction to sellers to disclose is also set forth in, among other documents, the Seller’s Advisory. It’s also a contractual requirement in paragraph 11N of the Residential Purchase Agreement.

Copyright© 2024 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 March 4, 2024. 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. Written by Stella Ling, Esq.