Real Estate Brokers Have Obligation to Disclose

Question: In a recent column you said that, under A.R.S. §32-2156 sellers and real estate brokers don’t have to disclose murders, burglaries, and other felonies that have occurred in the home. You also said that sellers and real estate brokers could have to disclose to buyers an abnormally high number of murders, burglaries, and other felonies that have occurred in the surrounding neighborhood. My question as a real estate broker is, what is the obligation of real estate brokers to determine if there is an abnormally high number of felonies that have occurred in the surrounding neighborhood? Do we as real estate brokers have to get crime statistics of the surrounding neighborhood from local law enforcement, and compare those crime statistics with other neighborhoods? Do real estate brokers then engage in discrimination by “steering” if buyers are told that the surrounding neighborhood has an abnormal amount of crime?

Answer: First, sellers and real estate brokers have different obligations of disclosure to a buyer. Sellers have no obligation to investigate, and are only required to disclose to a buyer known material and adverse facts relating to the purchase of the home. Sellers have no obligation to disclose material and adverse facts that the seller should have known. This obligation of the seller is generally fulfilled by completion of the Seller’s Property Disclosure Statement. Second, the obligation of real estate brokers regarding disclosure is significantly different. Like the seller, the real estate broker is obligated to disclose to a buyer all known material and adverse facts. A real estate broker also has the obligation, however, similar to other professionals like doctors, lawyers, and architects, to comply with the standard of care in their profession. For example, if the seller did not know of a “meth lab” in a home down the street, but everyone else in the neighborhood knew of this meth lab, the seller would have no liability for not disclosing this meth lab to a buyer. If most real estate brokers that “farm” this neighborhood knew of this meth lab, the standard of care for a real estate broker would require disclosure to a buyer of this meth lab. Any real estate broker failing to investigate and discover this meth lab could have liability to a buyer for not disclosing this meth lab. Similarly, if the standard of care requires a real estate broker to get crime statistics for the neighborhood, a real estate broker could have liability to a buyer for not telling the buyer about these crime statistics. Finally, “steering” of buyers is guiding buyers to or away from a neighborhood based on race. “Steering” is a Fair Housing violation. Disclosure of abnormal crime statistics in a neighborhood by itself is not “steering.”

Note: If a real estate broker generally only sells homes in Peoria, but then sells one home in Gilbert, a real estate broker is held to the standard of care of a real estate broker in Gilbert. For example, if most real estate brokers in Gilbert know of, and disclose to buyers, a large landfill near a Gilbert neighborhood, the Peoria real estate broker could be liable to a Gilbert buyer for failing to disclose to a buyer this large landfill.