What duties do Nevada real estate sellers’ agents have regarding the Seller’s Real Property Disclosure Form?
A new Seller’s Real Property Disclosure Form (SRPD) was released in Nevada in September 2021. In this webinar, Kathryn Holbert from Nevada Real Estate Law and Dave Miller, Regional Vice President with Fidelity National Home Warranty, talk about the amended duties of sellers’ agents regarding handling the SRPD.
This informative webinar covers:
- The statutory duties for licensees and brokers
- Why it’s essential for real estate professionals to understand and use the new form
- Why it’s critical the seller completes the form and NOT the broker or licensee
- How translating the form for the seller can lead to a lawsuit and should be avoided
- The difference between ‘factual’ and ‘legal’ questions and how the broker or licensee can minimize risk when fielding questions from clients
- The impact of incomplete forms and who is responsible for following up before escrow closes
- Why the form is so important to buyers to make an informed decision about a property
To find out about the amended duties for sellers’ agents in handling the SRPD, watch the full webinar here:
Laura Prouse: Thank you for joining us today on What Duties do Nevada Real Estate Agents and Brokers Have Regarding the Seller’s Real Property Disclosure Form (SRPD). I’m Laura Prouse with CRES Insurance Services. Today, we welcome Kathryn Holbert from Nevada Real Estate Law, Incorporated. Kathryn has been defending real estate professionals throughout Nevada for more than 15 years and is a very active member of the CRES legal panel. Along with Kathryn, we have Dave Miller, Regional Vice President with Fidelity National Home Warranty. CRES E&O members can reduce their out-of-pocket claims costs by purchasing a Fidelity Home Warranty.
Dave Miller: Kathryn, There’s always so much going on in Nevada. You have some new forms there that we’re going to talk about today. The SRPD that came out last year was supposed to addresses some problems, but you’re still seeing a lot of issues with it. We know disclosures, or lack thereof, are the cause of most claims. But can you explain how real estate agents are involved with this seller’s form and what’s happening?
Kathryn Holbert: The Seller’s Real Property Disclosure form has actually been around a long time. It’s one of the few forms that the Nevada Division of Real Estate creates because they have a statutory duty to create it. However, that statutory duty to the Nevada Division of Real Estate comes from NRS Chapter 113, which concerns Sellers’ Real Property Disclosure duties. Most agents don’t really realize that the Chapter 113, that is titled Seller’s Disclosure Duties, actually contains provisions in there that create statutory duties for agents and brokers that they better comply with.
Kathryn Holbert: The most recent revision of the SRPD was last September of 2021. The seller’s portion of the document wasn’t changed at all. The changes that they made were to the section of the form that sets out the law, which is in 113. The change was made because they made changes to the law that deal with licensees’ duties specifically. That’s why it’s so important for licensees to understand and be using the new form, and be aware of the changes made, because they specifically deal with what agents need to do.
Dave Miller: What I understand is that the form was designed to protect the licensees and brokers from untruth from sellers. But it seems like the form is broadening their duties. Is that correct?
Kathryn Holbert: Yes. The intent was to do something that better protects licensees. But the difficulties that arise are from the merging of the forms of the licensee under NRS 113 with their 645 duties, because they’re not exactly the same, and they have to meet them both. The only way, of course, to meet them both is to know and understand them both.
Dave Miller: Let’s talk about the seller’s side and the buyer’s side with regards to this form. For sellers, what do the sellers need to know about this form?
Kathryn Holbert: The two key highlights to start with:
- Hand your sellers a paper copy of the form. In today’s world, we do a lot of stuff electronically. We use Authentisign. I always say, “Whenever possible, do not Authentisign the SRPD, because to even set up the Authentisign process, it usually requires you to let them toggle.” I’ve seen them double check both the yes and the no boxes because they have to have the option. So whenever possible, hand them a hard copy of the SRPD.
- You can’t give them legal advice about it. It is a legal form. But you can answer some of their questions. For questions you can’t answer, instruct them to contact their own attorney. Sellers must complete the form. That is one of the specific statutory revisions made, is a specific instruction to the agent that they are not to complete the form.
One area I see becoming an issue, that people don’t really realize is an issue, is when there’s a language barrier. Licensees might translate the question for the seller and then mark the box when the seller gives the answer. Do not do that.
Do not act as the interpreter or the translator for them. If they need the English form translated, they need to talk to their own family member or their own friend or whoever can help them complete the form. But do not translate it, and do not make a single mark with your pen on this paper at all.
Give your seller the form and explain what it is. It actually comes with a disclosure guide that the state has. It’s like a 12-page booklet that will go through the form. So if they ask you a question, say, “Please refer to your guide. I’m sure that answer is in there. If you have any other questions, refer to your attorney.” But you can’t complete it. You can’t give them legal advice about it. And, please, whenever possible, hand them a hard copy and get a hard copy back from them.
Dave Miller: I can see that being difficult, because so many real estate professionals take pride in assisting their customers with paperwork, because it can be overwhelming. So your advice here is just to stay away from it.
Kathryn Holbert: Exactly. There are some non-legal questions that you can answer. What does it mean by public sewer versus septic tank? You can answer that because that’s not legal advice. If it’s a factual question that you can answer, you can. But if it requires legal advice at all, stay away from it.
The other big issue is the statute. Actually, one of the duties that a licensee has specifically is to turn over a completed SRPD. Of course, you can’t make sure you do that without reviewing the SRPD you get back from your client. So don’t push this off to your transaction coordinator or somebody like that. You make sure you get the SRPD from your client. You look at it. You read it. Are there issues with the house that you should be aware of? Are there any blanks at all?
If there is one single blank on that form, including if you check a yes, you have to do an explanation. If they check a yes and haven’t provided an explanation, the form is not complete. So the onus is on the licensee to ensure the form is complete. That’s who’s going to get in trouble if this form isn’t completed, because although a licensee can’t give legal advice, they can look at the form and say, “Hey, you didn’t answer this question. I need you to answer this question.” If the form’s not completed, they always blame the agent, not the seller.
Dave Miller: I think you’re recommending, too, to ask the seller if they’ve obtained a recent home inspection or have done any recent repairs to the property, and if they have, are those now to be updated on the form? What would your recommendation be there?
Kathryn Holbert: That is actually a fairly complex, very fact-specific question. Generally speaking, what the agent’s duty is under 645 is to convey any material information that the agent knows about the property. What the sellers are required to disclose is any defects regarding the property that they know. If there was an issue with the property that’s been fixed, it’s technically no longer a defect. However, it’s still material information concerning the property. So, in that particular scenario, the agent may very well have a higher disclosure duty than the sellers do. It can be an interesting situation with your client if they say, “Hey, I fixed that. I’m not disclosing it on the SRPD.” Of course, you can nicely say, “I understand that, and you may not have to, but if it’s material information that I have, I have to disclose it.”
It is a fine line. Exactly what it is, of course, comes down to what’s material. At the end of the day, that’s a question for the jury, but nobody wants to go down that road. As always, when in doubt, disclose. But it can be fact specific. If you’ve got any questions on that, and you’re not sure, that’s when you reach out to your risk management and say, “Hey, I’ve got a question on a specific transaction. What do I need to do here?” Of course, that’s why you have the risk management programs through CRES.
Dave Miller: Absolutely. All CRES members have access to the risk management hotline and to risk management documents. Let’s go over to the buyer’s side now.
Kathryn Holbert: This is a Seller’s Real Property Disclosure form, and the sellers have the duty. However, it’s the buyers that care what is on this form. It’s done for the buyers’ benefits, so the buyers can make educated decisions about the property. It’s the buyers that are ultimately going to complain and file a lawsuit if they have a problem with this document. As critical as it is for the duties on the seller’s agent side, they’re even more so on the buyer’s agent side. You are essentially a gateway protection. That’s why the form has to go through the agents. You see it before your clients do.
Again, this isn’t a transaction coordinator kind of job. It doesn’t come into your transaction coordinator, and they send it out to the other side. It comes into you, you look at it, you go through it. You know what’s on this document before you forward it on to your client. They do need to review it. They do need to acknowledge having seen it, but you better look at it first and know if you need to say, “Hey, look at this issue.”
Kathryn Holbert: It’s the seller’s agent that has to make sure the form’s complete under the statute. But, for the buyer’s side, they also need to make sure it’s complete to make sure they meet their 645 duties to their client. But if you get a form that’s not completed, you still have to give it to your client. I usually say, “Simultaneously, send it back.” Send it back to the other side, the seller’s agent, and say, “Thank you for sending over your SRPD. It doesn’t appear to be complete. Please have your client finish the information on question six.” Or whatever it is. Go ahead and point out where the deficient information is.
But you also then, at the same time, send it onto your client and say, “This is the Seller’s Real Property Disclosure form that I received. You may notice they didn’t answer question six. I’ve already reached out to get that information.” Unfortunately, I have seen transactions close where even though that exchange happened, nobody waited for a completed form, and they closed escrow without getting the form complete. You can’t withhold the form from your client until they send you a completed one. So that’s the process you have to do, but you follow up with it, too. You don’t just send the one email, and that’s it. That’s on your to-do list. Before this escrow closes, we need to make sure we get a completed SRPD.
Dave Miller: When you’re on the listing side, it’s really an arm’s-length relationship. The seller fills out the form. But on the buyer’s side, you’re okay with the agent getting involved in saying, “Hey, they didn’t fill out these two questions. Let’s ask this. Let’s get involved.”
Kathryn Holbert: Yes, you need to know this information about the property. The most information you can get, that’s the purpose of the form. In fact, it’s very clear in the statute itself and in the form and in the paperwork. This isn’t to replace due diligence. That’s what they’ve tried to convey. This isn’t in place of due diligence. It’s a key document in helping the buyers understand the due diligence they need to get.
It’s like, “Here’s your starting point. This is the information we have. These are the things you need. You can take this information and decide what additional due diligence you need to do on the property.” But if you don’t give them that baseline information, essentially, I don’t know if a good analogy is maybe a map. You’re giving somebody a map. It’s up to them to figure out how to use the map and get to where they want to go. But if you give them a wrong map, then it’s your fault when they get lost.
So the SRPD is critically important for both sides. The sellers’ agent has to make sure that form’s completed, and you’ve disclosed your information. But actually using the form is on the buyer’s agent side.
Dave Miller: Kathryn, what’s the shelf life of the form? I mean, let’s say … it’s actually a couple of months old because it’s been on the market now for a while. What’s your advice there?
Kathryn Holbert: Well, the normal course, which I think is a good practice, is to get this SRPD signed at the same time as a listing agreement, because you’ve only got three days from accepting an offer that you have to turn it over. When licensees take the listing, they’re like, “I want you to complete the SRPD now,” because the sellers aren’t under stress then. They’re not at the same time considering an offer. They’ve got time to look at it.
Most brokers will not even put the property on the MLS until they’ve got a completed SRPD. So, of course, then, if it takes a little bit of time to get an offer or a transaction falls through or whatever, it can get stale. It can get old, of course, depending on the market. There’s not a statutory guideline at all, but my guideline is six months. For sure, after six months, you get a new SRPD. But even at two or three months, the buyer’s agent might want to be saying, “Hey, will you have your client review the SRPD and make sure it doesn’t need to be updated?” But after six months, you insist on a new SRPD.
Dave Miller: When in doubt, disclose.
Laura Prouse: Thank you both. As always, very, informative and very timely. Thank you to our audience for watching. Hope we’ll see you next time.