Just Tell It Like It Is

Disclose RECAD & Caveat Emptor in first conversation

The most important fact

an Alabama real estate agent can share with prospective buyers and sellers of real property in Alabama is that Alabama laws are different than most other states. Especially those states adjacent to Alabama because industry standards tend to spread across state lines. Alabama is a “Caveat Emptor” state. This simply means “buyer beware!”  To be more precise, Alabama is a modified Caveat Emptor state; because it exempts “New Homes” from Caveat Emptor. New homes are warranted by the builder while secondary (pre-existing) or used homes are not warranted by anyone. The purpose of “Caveat Emptor” is to notify the buyer that it is his responsibility to have the proper inspections performed on a home before they actually close on the sale. The buyer is not to rely on the seller to disclose all imperfections of a property, when making a decision whether to buy or not to buy.

Due to influence of markets in other states, some brokerage firms require their seller to complete a “Sellers Disclosure” form at the point of listing. That’s a fine practice to have in place in states that do not have Caveat Emptor, but in Alabama that just complicates the issue. The seller of real property in Alabama is not obligated to disclose any defects except defects that affect health and safety; unless the seller is asked a specific, direct question about a deficiency.  It is solely the responsibility of the buyer to investigate and determine a homes condition prior to closing on a sale. Charles Sowell, Senior Counsel for the Alabama Real Estate Commission has stated it plainly in an article entitled, “Caveat Emptor vs. Seller Disclosure.”

As a licensed real estate agent in Alabama,

it is our responsibility to explain to all prospective buyers how Caveat Emptor affects their buying decisions. Since Alabama is a Caveat Emptor state, it is to the best interest of the buyer to be represented by a professional, qualified brokerage firm to ensure that proper inspections are completed. This is one of the main reasons Alabama has a RECAD (Real Estate Consumer’s Agency and Disclosure Act) law. To inform a buyer the four ways they can be represented by a brokerage when buying real estate in Alabama. Alabama law clearly states in Rule 790-X-3-.13 that all licensees are required to provide the Real Estate Brokerage Services Disclosure form to the consumer as soon as reasonably possible for his or her signature.  Consumers are not required by law to sign the form, although the licensee should encourage that it be signed. If the consumer declines to sign, the licensee shall make a note to this effect on the form. I will assure you that this from is by no means a contractual agreement; it is only an acknowledgement that the various Agency relationships have been explained in detail.

The question then becomes

why this RECAD form is so important. It’s really very simple. The consumer needs to know if and by whom they are represented when buying or selling real estate in Alabama. For some reason many consumers don’t want to work with just one real estate agent. They want the freedom to shop around and use a number of different agents. I guess they feel like they can get a better deal from the agent that list a particular property.  If they truly understood the law, they would realize the importance of being represented by only one agent because Alabama law does not provide for multiple agents to represent the same consumer. If a consumer is not represented by one particular agent, then all agents are limited to the information they can share with that consumer. Personally I believe this dilemma stems from the agents inability to fully explain RECAD and how it relates to Caveat Emptor.

I don’t want to scare anyone that’s thinking about buying real estate in Alabama because it is a very safe process if you understand the law. I fear some real estate agents are so consumed with completing the required RECAD process; they fail to deliver the nuts and bolts of why these two issues are so important. I honestly believe the majority of consumers appreciate and respect an agent that tells it like it is right up front. Agents shouldn’t sugar coat our laws, or hurriedly skimp over explaining the RECAD process.

It is the duty of the real estate agents

to explain to prospective buyers that in a Caveat Emptor state, it is their duty to discover any deficiencies in a property before they buy it. If they don’t heed this warning and some legal issue arises after the date of closing, the Caveat Emptor law can hinder them from receiving financial aid to correct such deficiencies. The consumer is not expected to know the laws of Alabama, but a licensed real estate agent is; and it’s their responsibility to explain such laws to the consumer. Should a consumer seek legal damages, and it is decided in the Judicial system, the agent could be found guilty of negligence.

My suggestion to all real estate agents

is to tell it like it is, as soon as you meet or communicate with a potential buyer or seller. Fully explain Alabama law as it applies to those buying or selling real estate in Alabama. It is the agent’s duty, both ethically and legally, to protect the consumer’s best financial interests.

My suggestion to the consumer

is if an agent doesn’t immediately disclose Alabama law to you; ask them about it or find a more qualified agent that can represent you and protect your interest.

Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to www.AlabamaRealEstateInstitute.com  and view previous articles.