real estate

Walls have as many holes as agent's story

Steve McLindenDear Real Estate Adviser,
We bought a house and started renovations when we found a severely rotted wall stuffed with carpet padding, hidden by new baseboards. The pattern repeated itself in three places. The selling agent initially denied knowledge, but later admitted, at a local Realtor board hearing, that he was the contact person and interpreter for the renovation contractors, who showed him the rotted wood, and the liaison for the owner's pest inspector, who told him, "The entire rear of the house is 'toast.'"

The agent instructed a contractor to obscure the rot. We learned that termite mud tubes were visible when the house was getting prepped for sale. His defense is that he isn't skilled in home repair and wasn't able to understand the contractors. Instead he relied on a professional pest report made prior to contractors entering the site. The Realtor board heard the case but somehow ruled that no ethical violations were found! Our agent called this a travesty. Is there anywhere else to turn?
-- Bryce N.

Dear Bryce,
Yes, it is a travesty, and yes, it seems that you uncovered -- literally -- numerous glaring ethical violations. And yes, you do have more options we'll review in minute.

As a rule, industries that police themselves -- be they real estate, legal, financial, law enforcement or others -- seldom throw the book at their own people unless the public spotlight is cast directly on them. No offense to the National Association of Realtors, whose agent members are largely professional and competent, but many of these board hearings are little more than hand-slapping exercises. Realtor boards are usually peopled by volunteers, not judges. While they may discipline a member real estate agent, they have no latitude to award damages and very little motivation to spite any NAR members. So what do you gain?

You don't say which articles of the NAR code you accused the agents of violating in your complaint. But Article 2 of NAR's 2012 National Association Code of Ethics and Standards of Practice says members "shall avoid exaggeration, misrepresentation or concealment of pertinent facts relating to the property or the transaction." It also says Realtors aren't obligated to disclose facts "which are confidential under the scope of agency or non-agency relationships as defined by state law." So there's wiggle room there. Another section, Article 12, says members"shall be honest and truthful in their real estate communications." That would seem pretty straightforward.

As one option, you could take this to your state's real estate commission. Many commissions have "recovery funds" that can be used to reimburse people who have suffered financial loss because of proven broker violations, usually limited to $25,000 in damages. But that could be an exercise in fiscal frustration, I sense.

Your best recourse could begin with a consultation with a real estate attorney. Your case is strong, and the Realtor admitted to the coverup. Courts have ruled in favor of buyers like you with less evidence.

Meanwhile, pull together all the relevant information you can, including (but not limited to) the seller's disclosure statement, any reports on hidden damage by your contractors, related photographs and records of the agent's statements to the Realtor board.

A few more observations: I'm a little mystified that arbitration wasn't suggested in your case. Some real estate contracts specify it as a first option. More importantly, Bryce, I suggest you use your own inspectors next time to examine a home because they will bring any concerns directly to you. A good one may have been able to detect the rot and termite damage or the many coverups, or both.

Good luck!

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