Duties and Disclosures to Third Parties

The most common complaint of buyers against brokers relates to misrepresentation by brokers or the brokers' associates

the National Association of REALTORS® (NAR) reports that nearly two-thirds of all complaints against members result from misrepresentation issues. Fraud is a type of misrepresentation where the misrepresentation is committed knowingly with the intent to deceive.

Surveys are generally required when:

conveying a portion of a given tract of land, obtaining a mortgage loan, government entities acquire land through condemnation procedures, showing the location of new or existing improvements, determining legal descriptions of properties. conveying a portion of a given tract of land, obtaining a mortgage loan government entities acquire land through condemnation procedures, showing the location of new or existing improvements, and determining legal descriptions of properties.

a broker must make at least three affirmative disclosures to a third party under certain circumstances.

disclosing significant defects in the condition of the property advising a purchaser to have the abstract of title covering the real estate examined making clear to the parties of the transaction which party the broker is working for.

License holders in Texas are required by TRELA sections 1101.555 and .652(b)(29) (A) and (B) to advise buyers in writing before the closing of a real estate transaction that the buyer should

(A) have the abstract covering the real estate that is the subject of the contract examined by an attorney chosen by the buyer; or (B) be provided with or obtain a title insurance policy.

Guidelines for Disclosure of Stigmatized Properties

1. Determine whether the information is fact or fiction. Investigate the validity of the information by checking sources such as newspaper accounts or reports from state or local agencies. Separate rumor from reality 2. Check state law. In Texas the law requires disclosure of all physical facts regarding the property. With nonphysical matters, the requirement to disclose will hinge on the materiality of the matter. 3. Determine materiality. To analyze the materiality of a set of facts that may produce a stigma, one must determine whether knowledge of those facts would affect the willingness of a reasonable person in deciding whether to buy the property or the amount of money to offer or pay for the property. 4. Discuss disclosure with the sellers. A listing agent who concludes that the physical or psychological stigma-producing facts are material and need to be disclosed should also discuss with sellers the basis for his conclusions and his intended course of action. The sellers need and deserve to understand the sales agent's analysis and why the particular facts may affect the marketing and sale of their property and, thus, must be disclosed. Often sellers can understand the problem better if they are asked to consider themselves in the position of a prospective purchaser and whether or not they would want the factual information before deciding to purchase or what to offer for the property. Discussing the matter with the sellers up front avoids objections and controversy later about why the particular facts were disclosed to prospective purchasers.

STIGMATIZED PROPERTIES

Another type of disclosure issue involves material facts related to stigmatized properties. Stigma refers to a perception of conditions or events (real or imagined) related to a property that reduces the marketability or value of the property. Stigmas may be classified as purely psychological stigmas or physical stigmas.

Megan's Law

The federal government now requires states to develop and implement registration procedures for released sex offenders living in their communities. Current Texas law enacted as a result requires a released sex offender to register with local law enforcement agencies and be photographed and fingerprinted. This information must be submitted to superintendents of public schools and to the administrators of private primary and secondary schools in the district where the offender resides. Additionally, enforcement officials must publish in a local newspaper information regarding the offender, including the name, age, and gender, a brief description of the offense, the street name, zip code, and municipality of residence, and the person's risk level, generally. If the individual is determined to be high risk (level 3), then notices must be mailed by the Texas Department of Public Safety (DPS) to each residential address within three blocks in a subdivided area, or within one mile in an area that is not subdivided. Texas law exempts owners of single-family residences and real estate agents from a duty to disclose information relating to sex offenders to prospective buyers or tenants. License holders should refer their buyer-clients to the DPS database to conduct their own research regarding sex offenders in the area.

To provide better disclosures to buyers of single-family dwellings, Section 5.008 of the Texas Property Code (TPC) requires a written seller's disclosure notice for most single-family residential resale properties.

The form is called the Seller's Disclosure Notice, and while it is an optional form, license holders frequently use it. License holders are free to use their own versions of the notice as long as they contain the minimum disclosures required by TPC Section 5.008. Brokerage firms that use their own versions of the form typically contain many more disclosures than those required by TPC

Title insurance

a contract between the insurance carrier and the policyholder to indemnify the holder for defects in title up to the policy limits. Note that the insurer does not guarantee continued ownership, only compensation for losses up to the policy limits. Title insurance companies are regulated by the Texas Department of Insurance (TDI) and are authorized to issue standard Texas policies. As a result of the 80th Texas legislative session in 2007, title insurance companies may also offer protection against defects in title for items of personal property, such as boats, RVs, automobiles, et cetera. The extension of coverage to personal property is particularly applicable in commercial real estate and farm and ranch, where lack of clear title and/or undisclosed liens to items such as office furnishings and equipment could be quite costly to the purchaser. The coverages, available endorsements, and exceptions relating to standard Texas policies that should be disclosed to buyers are shown in the following lists.

Physical Stigmas

arise when some negative or detrimental physical or environmental condition exists that may not directly affect the property but may affect the health or safety of the occupants. These conditions may have real or imagined health-related problems, but in either case the property suffers a loss in marketability or value. Problems in this area may include asbestos, lead hazards, electromagnetic fields (EMFs), radon, chlorofluorocarbon emissions, hazardous waste disposal, underground storage tanks, soil or groundwater contamination, and previous use of premises for manufacture of methamphetamines.

Abstracts of title

condensed versions of all records relating to the subject property, beginning with the initial transfer from a sovereign government forward to the present owner. The abstract contains a chronology of all instruments filed into the property records; this may include taxes, judgments, releases, and so on. Although abstractors make no judgments relative to the condition or quality of title, they are liable for failing to include or properly record all pertinent data. The abstract is then examined in detail by an attorney who evaluates the facts and submits a written report (opinion of title) on the condition of the title to the purchaser. The report is considered evidence of title for the current owner.

NONFIDUCIARY DUTIES

duties that are owed to customers (nonclients) and to the general public (consumers).

Purely Psychological Stigmas

those that occur as a result of real or imagined events, at the property, that have no actual physical impact on the property or the occupants. An example of this type of stigma is a death occurring on the property as a result of natural causes, accident, murder, suicide, or an AIDS-related illness.