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What happens if a seller receives a copy of a recent inspection report?  Must they share it with a future buyer?  The scenario is common.  A seller lists their home.  A buyer submits a contract with an option period. Seller accepts. During the option period, an inspection is conducted by the buyer.  The inspection reveals something unacceptable to the buyer, who subsequently backs out.  The buyer’s agent sends the inspection report to the seller’s agent as an explanation.  If a seller’s agent receives a copy, it is deemed to have been received by the seller.  Must it be shared with future buyers as part of the seller’s disclosure?

It’s been said: “disclose, disclose, disclose.”  Texas Property Code §5.008 outlines how.  The statute, which is intended to be a minimum requirement, does not specifically require the inclusion of copies of recent inspection reports.  TREC has an approved Seller’s Disclosure Notice that mirrors the language of the statute and does not require recent inspection reports to be included.    Texas REALTORS® also have a recommended form with added provisions intended to reduce the risk for a seller, including a directive to list any written inspection reports received within the past four years and to attach copies.  Other organizations have other, similar recommended forms.

So must the seller share a copy of the inspection report?  No.  But they must disclose all knowledge of the condition of the property.  Property Code §5.008 requires that the notice be completed to the best of the seller’s belief and knowledge as of the date the notice signed by the seller.  While the statute does not require the seller to update any disclosure once an inspection is received, the seller should do so so to ensure that any future buyer is made aware of newly-revealed conditions.  TREC’s Canons of Professional Ethics and Conduct require “a real estate broker or salesperson … to exercise integrity in the discharge of the license holder’s responsibilities, including employment of prudence and caution to avoid misrepresentation, in any wise, by acts of commission or omission.”  One could easily argue that by not advising a client to update the Seller’s Disclosure Notice, a license holder is omitting material facts the buyer has a right to know.  As such, the seller should be instructed to update the Seller’s Disclosure Notice for any future buyer to include all that was learned from the inspection report.

A best practice to avoid a potential lawsuit claiming failure to disclose a material defect against both the seller and the broker is to include a copy of the prior inspection report with the Seller’s Disclosure Notice and provide both by attachment in the Multiple Listing Service entry or other advertising platforms. If the seller repairs or corrects any of the items on the inspection report include invoices, receipts, and any warranties with the Seller’s Disclosure Notice as well.  

We hosted a Facebook LIVE with our General Counsel on this topic. Check out the video below: 

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Chelsea Buchholtz