Selling a home in NYC can undoubtedly be a fraught process, especially with the city currently experiencing a buyer’s market. Chances are you’ll go the route of the majority of NYC sellers and hire a real estate broker. The sales agent – also known as the listing broker – is someone you’ll have a very close working relationship with. They’ll get to see every facet of the property which naturally raises the question – how much must they disclose to any prospective buyers? We’ve already touched on the seller’s disclosure obligations. Now let’s look at it from a listing agents perspective.
The Role of the Listing Broker
After you’ve interviewed several real estate brokers and decided on one to hire they’ll ask you to sign a “listing agreement.” This authorizes the broker, among other things, to offer the property for sale at an agreed upon price and sets out the commission arrangement.
For the time that the agreement is in place, your listing agent will help you with setting the right asking price, negotiate with prospective buyers and their agents, and help you with contracting and the closing process. To carry all this out, they must gather up-to-date information on the property through appraisals, inspections, and surveys.
Buyers will also usually hire a broker, known as a buyer’s agent, to guide them through the buying process. During the open house, inspections, and negotiations they’ll usually pepper both brokers about the condition of the property. Namely, whether or not it has any known defects. So what are the disclosure obligations of the listing agent to the seller?
The Listing Broker’s Disclosure Obligations
The traditional rule of “caveat emptor” – let the buyer beware – is still applied to property transactions in NYC. The listing broker is under little obligation to disclose known defects or carry out inspections in search of any. That responsibility falls on the buyer. However, there are exceptions to this rule. If the listing broker passes on information about the property to the buyer that they know to be false or if they omit facts regarding defects they may be liable for damages to the seller. But only if the buyer’s decision to buy was based on this misinformation.
Disclosure Requirements under the PCDA
Since the Property Condition Disclosure Act (PCDA) went into effect, listing agents are required to advise the seller about their disclosure obligations before the buyer signs the purchase contract. Also, the listing agent must also inform the buyer of the PCDA if they are unrepresented. Failure to perform these actions promptly could make them liable for violation of the PCDA.
What the Listing Agent May and May Not Disclose
Under NY State property law, the listing broker is not required to conduct an inspection in search of defects or to verify what the seller has said about the property. However, if they know of any defects or that the seller has misrepresented the condition of the property they are obligated to inform the buyer of this.
To deal with the problem of “stigmatized properties,” brokers can choose not to disclose specific information about a property. For instance, if there was a felony committed on the site such as a homicide or suicide. Or if the previous occupant had or was suspected of having HIV, AIDS or other diseases that are unlikely to be transmutable through occupancy.
Granted, the buyer can make a written inquiry to the seller or their agent asking for this information, but they are under no obligation to respond. Nor can the broker be sued or face disciplinary action for failing to disclose the excluded matters.
Have a thorough understanding of a listing agents disclosure obligations before you hire them. They can answer any questions or clarify a few points during your first interview. This is also an excellent way to test their knowledge of property law and their level of confidence. After all, when it comes to choosing a listing agent, it pays to select the best.