If you`re looking to buy a house, don`t expect the real estate agent to tell you if the home you want is in a safe neighborhood with good schools or is being sold at a fair market price.
That`s because there are some things a real estate agent can`t, or isn`t supposed to, tell prospective home buyers. And whether or not the home is in a low-crime area, the schools are academically excellent or the house is a good value, is not for the agent to say, according to experts in real estate law.
This does not mean that an agent won`t answer these buyer concerns. When the news is positive-the neighborhood is virtually crime free and the local high school is nationally ranked-agents are more than happy to talk specifics. In fact, many agents consider themselves to be local ambassadors, and offering opinions on schools and crime, as well as shopping and recreational opportunities, is part of the good-will package.
”Everyone is aware of the rules, but sometimes a Realtor will express his or her own views to make a sale,” says Arne S. Fox, president of the Chicago Association of Realtors and owner of Fox Realtors. ”Realtors know too that their job is to sell a house, not be the local expert on schools and crime.”
But sometimes such expertise-or a loose interpretation of the rules-is necessary to complete a sale. Thomas E. White, a Hoffman Estates father of two girls, used a local agent when he purchased a four-bedroom home nearly five years ago. White wanted information on the local school district before he would move to the area.
”If the agent couldn`t give me an informed opinion on the schools, it would have been a problem for me to buy here,” says White.
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Whose agent?
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Often it`s an agent`s financial responsibility to the seller, rather than a lack of personal knowledge, that prevents him or her from disclosing information that would make a buyer reject a piece of property.
This is not to say that real estate agents purposely hide information about a house that would make a buyer walk away from the sale. Indeed, agents must by law disclose defects that adversely affect a home`s value, such as a leaky roof or faulty electrical wiring. Yet a fiduciary agreement between agent and seller as well as certain industry regulations can prevent agents from telling all they know about the homes they sell.
Can a murder or suicide that`s taken place in the beautiful Victorian you`d like to buy affect the home`s value? Perhaps.
But according to Illinois real estate licensing regulations, agents can withhold, without liability, information on acts or occurences that have no effect on the physical condition of the property. Whether this information actually affects value is debatable.
The rules also consider information on whether an occupant of a home carries HIV, the virus that causes AIDS, to have no impact on the property at sale time. As a result, an agent is again not liable for non-disclosure.
”This is one of the few rules that is spelled out,” says Steve Bochenek, legal counsel for the Illinois Association of Realtors. ”Agents are protected from not disclosing this information.”
Race and ethnicity
Yet withholding information is different from not being able to talk about certain issues. For example, discussing the presence of minority groups in a given neighborhood is off limits for agents. Some buyers try to skirt the issue by politely asking the ethnic makeup of a neighborhood, but even this neutral phrasing does not mask racial overtones. And agents who provide the answer face ”a strong possibility” of violating fair housing laws and real estate licensing guidelines, say Albert Suguitan, commissioner of real estate for the Illinois Department of Professional Regulation.
”Real estate agents can`t be social engineers with designs on affecting the racial balance of the neighborhood,” says Suguitan. ”Revealing the ethnic mix is not germaine to the livability of a residence.”
In most transactions, agents confine comments to general terms because there isn`t really a set of rules that must be followed. And remaining silent on questionable issues reduces the likelihood of lawsuits.
Often, it`s the homeowner who lays the ground rules for what agents may or may not disclose. In traditional residential real estate sales, the agent represents the seller. Similar to an employer-employee relationship, the homeowner can set certain guidelines for the agent to follow when selling the home.
For example, should a seller decide to withhold the reason for the property sale, the agent must not disclose it. ”Owners may not want prospective buyers to know that they`re desperate to sell because of a job move or a divorce,” says Fox. ”Because this information may compromise the purchase price, only with owner permission are they free to tell.”
Bound by the contract
Sometimes, even if the guidelines set by the agent are questionable, the agent is bound by contract to remain silent.
”If a house looks like it hasn`t seen a fresh coat of paint in 10 years but the basement is freshly latexed, I may suspect flooding,” says Pauline Bastek, an associate broker with Century 21 Gold Star in west suburban River Grove. ”If the owner denies it, then I can`t tell the buyer to watch out, the paint may be disguising a leaky basement.”
Industry associations are working toward legislation that would make sellers tell prospective buyers about the true condition of their home in writing. What buyers rely on now is trust.
Hanover Park resident Steve Rottman wanted to know if the windows would have to be replaced on the three-bedroom townhouse he purchased five years ago. While the windows proved to be OK, the Realtor could not offer an opinion.
”Even though I knew the agent worked for the seller, I thought she`d be familiar enough with the property to know for sure whether or not they`d have to go,” says Rottman. ”But the seller told the agent the windows were OK and that`s all the information she could pass along to me.”
In literature on seller disclosure, the National Association of Realtors claims that lawsuits are on the rise and that buyers are receiving higher judgments against brokers for misrepresentation, negligence and fraud. The NAR could not point to specifics on the number of cases or judgment amounts, but the types of cases reaching litigation are typical new-homeowner complaints, says Laurene K. Janik, general counsel for the 700,000-member organization.
”Everyone thinks there are deep, dark secrets out there, but it`s pretty usual stuff, like leaky basements, boundary disputes and faulty electrical wiring that nobody wants to talk about,” says Janik.
Often the information agents are privy to can make a home more attractive to a buyer, but at the same time can leave the seller with a financial loss if disclosed. For example, if the list price is higher than what the owner would accept, the agent must not tell this to prospective buyers.
No promises
Even if actual numbers are not disclosed, agents must not promise buyers that they will get them a good deal on the price of the property, according to licensing regulations. Because agents typically do not work for the buyer, such a practice is known as ”dual representation” and is legal in Illinois only if disclosed and agreed to by all parties in the transaction.
Despite their pledged allegiance to the seller, agents often go out of their way to be helpful, driving buyers to a listing or even taking them to lunch.
”It`s hard not to look out for the interest of the buyer when you`d like them to recommend you to their family and friends,” says Bastek. ”In essence, the seller pays the agent`s commission, but only with the proceeds from the buyer`s money.”
Perhaps this explains the popular, but puzzling, chorus, ”my agent got me a good deal on my house,” sung by many new homeowners. The fact is, ”my agent” is really the seller`s agent.
The NAR says this refrain is a sign that there is widespread confusion about who represents whom-and perhaps what can and can`t be said-in a residential real estate transaction.
To help more buyers understand that agent allegiance goes to the seller, real estate agents in Illinois must present a prospective buyer with a form outlining this information. But knowing this can still raise concerns.
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”After you learn that the agent is working for the seller, it`s hard to know if you`re getting full disclosure,” says Jonna L. Holt who, along with husband Brian Pugliese, owns a three-bedroom home in Lombard. ”This makes doing your homework, like checking zoning ordinances and looking up records at the town assessor, even more important.”
Frustrating questions
Once the players and their teams are identified, asking simple questions can still be frustrating.
”I could see the house was beautiful, but I wanted to know if the neighborhood was friendly,” says Diane Witte, owner of a 14-room Victorian in Oak Park. ”The agent told me I should ring doorbells and talk to the people myself.”
If the neighbors proved to be hostile, would this affect the home`s value at sale time? Perhaps, but not legally, say industry authorities.
Precisely what does affect a property`s value is something of a gray area when it comes to disclosure. ”A lot of information is too subjective for real estate agents to discuss,” says Suguitan. ”But agents can help buyers by telling them how to get the information they need or even suggesting that they hire an inspector for property issues.”
Despite a few loosely interpreted rules, the fact that there is no central listing of what an agent can and cannot say adds to the problem and can be a source of confusion for agents and buyers alike.
”Most of the time agents have to rely on common sense because the law doesn`t provide them with a checklist of what can and can`t be disclosed,”
says the NAR`s Janik. ”At some point, the buyer has to take responsibility.” Janik offers this example: If a house has a big hole in the roof that can be seen by passersby, does the agent have to mention it to prospective buyers? ”At what point do you say this is obvious and this is not,” says Janik. ”But I would mention it just to be on the safe side.”