Mv Buyer, Home Buyer in Mission Viejo, CA

Is it an agents fiduciary duty to investigate lack of permits for a structural remodel?

Asked by Mv Buyer, Mission Viejo, CA Wed Dec 22, 2010

Shouldn't a buyers agent fully investigate a known concern about expired permits and fully explain the possible repercussions to their clients before allowing them to enter escrow on a short sale? Especially when it is a FHA loan. Also, what is the sellers agent's responsibility when they have been told the permits are expired and their clients are misrepresenting the status of the permits?

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27
Faalua Ahsoon, , Orange County, CA
Wed Dec 22, 2010
MV Buyer,

It is really not your agents responsibility to investigate adverse issues regarding permits. His or hers responsibility to you is to disclose, and it is up to you to do your due diligence and to investigate property condition. Often times, agents will do search for you regarding permitted issues, etc. This does not mean that this becomes their fiduciary duty to you. Their fiduciary duty to you is to disclose all they know about the property, good and bad, and let you make final decision on accepting, open escrow, etc.

You should have asked more questions. You should have spend more time doing your homework. With little you have explained about your situation, it seems to me that you are trying to shift blame to your agent. They did not put a gun to your head and forced you to open escrow or to accept unpermitted add-ons...did they??

Good luck!!
1 vote
Mack McCoy, Agent, Seattle, WA
Wed Dec 22, 2010
The best "sales pitch," CBREL, is the truth.

In non-real-estate related matters, I have a "three-strikes" rule: you give me three unreconciled problems, I get outta there.

But the fact of the matter is that it's difficult to say "no" to a good deal - a short sale, commission rebate, in-office one-stop shopping against competing offers, how can you refuse?

I don't know the answer. Our home buyer appears to have suffered insult in addition to injury, but there's a complicity here, too - why continue to deal with unethical people?

On your next deal, MV Buyer, don't swim with the sharks. You'll save yourself a lot of headaches, and you can still get a good honest deal.

All the best,
1 vote
John Sacktig, Agent, New Jersey, NJ
Wed Dec 22, 2010
“Also, what is the sellers agent's responsibility when they have been told the permits are expired and their clients are misrepresenting the status of the permits?”

None. except to tell you that there are no permits.
A smart sellers agent would tell you that there are "no permits" if they know about it.
1 vote
Mack McCoy, Agent, Seattle, WA
Wed Dec 22, 2010
No.

Real estate agents are not permit experts or land use experts, and should not be relied on as experts in these matters. The fact than an agent may have a little more knowledge than a buyer in these matters does not qualify them as an expert; in addition, acting as an expert outside of the scope of providing brokerage services exposes the agent to liability.

As for the seller's agent, it is not their responsibility to independently verify the accuracy of information provided by their client.

MvBuyer, I understand your problem, but the burden of investigating concerns falls with the buyer, not the agent.

All the best,
1 vote
John Sacktig, Agent, New Jersey, NJ
Wed Dec 22, 2010
"Is it an agents fiduciary duty to investigate lack of permits for a structural remodel? "

Simple answer: No.
1 vote
Richard Schu…, Agent, Los Angeles, CA
Thu Jan 6, 2011
It the broker's duty to advise you to investigate and provide you contacts or references to investigate them professionally.


Let me know if you have any questions.

Best,


Richard Schulman
#1 Listing and Selling Agent
Keller Williams West Los Angeles
310-482-0173
schulmanrd@yahoo.com
http://www.RichardSchulman.com
0 votes
Thom Colby, Agent, Irvine, CA
Sat Jan 1, 2011
Buyer,

You could have also searched the City of Mission Viejo website on line for BUilding Permits issued, etc.
http://dms.cityofmissionviejo.org/sirepub/docs.aspx >>> Select Permits and enter the address. This is public information and readily available.
0 votes
Myra Gouger, Agent, Las Vegas, NV
Sat Dec 25, 2010
If there was no permit on a structural remodel, the appraiser just does not use that section when figuring out the square footage of the home. You can still get an FHA loan, it is just for a smaller square footage structure than you thought you were purchasing. This is part of your due diligence period. All you had to do was call the city or county where the permits are archived to find out how up to date they were or weren't.
0 votes
Ryan White, Agent, Rancho Santa Fe, CA
Sat Dec 25, 2010
Homes can be sold that have unpermitted structures on them. If it is known that permits are expired or a structure was not permitted than naturally it must be disclosed. FHA will likely have a problem with loaning on the home but there are banks that will. In the C.A.R. purchase contract investigating the property is the buyers responsbility. Your question implies you discoverd the lack of or expired permits before you purchased the home which is grounds to cancel as long as you have not removed all of your inspection contingencies. I understand your frustration.
0 votes
Thom Colby, Agent, Irvine, CA
Sat Dec 25, 2010
Mv Buyer,

To answer your specific question, NO. It is the BUYER's responsibility to perform all investigations and Due Diligence during the contingency period. Read the Residential Purchase Agreement - it clearly spells it out.

I think there is likely other issues with this transaction as you have mention in your other questions on Trulia.

Thom Colby
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. There is NO benefit to the Seller or Buyer and only benefits the Agent. Also, NEVER use your RE Agent / Broker as your Lender or vice versa. Also, be careful when using Real Estate Broker-owned Escrow and Title Companies - they can be loads of trouble.
888-391-5245 Direct Cell
THOM@THOMCOLBY.COM
DRE# 01398570
0 votes
Mack McCoy, Agent, Seattle, WA
Wed Dec 22, 2010
MV Buyer, we have no idea of how a judge would see this, but contracts are generally presumed to be written evidence of an agreement between the parties. The difficulty, as I see it, is in convincing an arbiter that you signed the contract even though it didn't represent your agreement.

We can't control the actions of other people, but we can control our own - I reaffirm my caution about swimming with sharks.

All the best,
0 votes
Felix Hung, Agent, Huntington Beach, CA
Wed Dec 22, 2010
Mv Buyer,

I am sorry you had to go through this. We as REALTORS often warn buyers - especially first time homebuyers about dual agency/dual representation. It can be done legally, but it is a LOT to handle for a first time homebuyer and I am personally against it. I have never done it, even when I had the opportunity. I hope you didn't go with the listing agent just to get the house. It's already been echoed by my colleagues and DRE: what's in writing is what goes. You signed it.

So what is the resolution on this situation? Have you cancelled escrow? Please make sure you check the credentials of your next REALTOR and maybe also ask to speak to former clients. Good luck!
Web Reference:  http://www.felixhung.com
0 votes
Connie Bramb…, Agent, Rancho Cucamonga, CA
Wed Dec 22, 2010
Hi MV Buyer,
I believe it was as Joseph said it was a tough lesson, but what I don't understand is why you would have changed you RPA after everything was accepted. If you had indeed the box checked with contingent til loan is funded why on earth would you change that at all? Unless it was in a counter offer but you indicated that it was after the fact and the seller was threatning to cancel if you did not change that. Not something the seller is allowed to do. Was there maybe something else they were able to cancel on you because of and they used that as leverage? At any rate as I said before I think you should attempt to recover some of your deposit. Remember the seller needs to cancel with you before they sell to someone else.
Connie Bramble
0 votes
Joseph Fleis…, Agent, Irvine, CA
Wed Dec 22, 2010
I am not an attorney, but typically, written contracts rule over promises, verbal agreements, etc.

You have admitted multiple times that your agent pressured you to sign these documents with terms you were not confortable with, but you also admitted that you agreed to these terms so that your offer would be accepted. You learned a tough lesson here; don't agree to something you arent completely comfortable with.

I hope thing work out for you.
0 votes
Mv Buyer, Home Buyer, Mission Viejo, CA
Wed Dec 22, 2010
I think I like Mr. Ahsoon's answer the best because he tells it like it is.
Agents and even their brokers who are suppose to live and work by the REALTORs code of ethics, can say and do anything they like, so long as either your signature or your brains are on the contract.

I called the DRE with a complaint about the constant badgering for me to agree to the 17 day loan contingency. I told my agent at least 10 times, I will not agree. I had them check the box that reads loan contingency will remain in effect until the loan is funded. They didnt like it, but the accepted the offer. Still they continued the pressure and threaten dropping my offer in favor of another that was agreeing to the 17 day contingency. So finally I agreed and they amended the RPA. I spoke with a deputy at the DRE and he said the judge will ask you MR. MV buyer, did you sign the contract? if yes, CASE CLOSED. So no matter what tactics or threats or out right lies they use to get that signature. CONTRACT RULES, right?
0 votes
Connie Bramb…, Agent, Rancho Cucamonga, CA
Wed Dec 22, 2010
Hi Mission Viejo Buyer,
Sounds like you have had more than your share of trouble in this escrow. It also sounds like you were aware of the permit issues going in. Your agent has a duty to disclose only what they are aware of. It is not up to he or she to investigate. However; it is up to your agent knowing that there are permit problems to let you know FHA will be a problem. FHA is not always a problem if there are no permits as long as the work was done properly, but they will not give any credit in an appraisal to additional square footage if there is no permit. I do not know the problem you had with FHA but as an agent if I knew there were permit issues I would certainly get the FHA appraisal done immediately. If you can't get the loan you should have got your deposit back as long as you were within your time frame in your contract. There should have been time to cancel and get your deposit back after the appraisal was done. And it doesn't matter what lender you have the appraisal is the same. As for your agent pursuading your to sign the contract that was not in your best interest I don't know what the issue was but there are times when shortning time frames or not asking for costs can be a benifit to you. Hindsite is always 20/20!
As for the deposit you need to check your contract to see when you needed to cancel by and under what terms you were allowed ot cancel. $1000 is in my opinion not a reasonable fee to charge you for cancelation at the last minute. Should be far less. Remember no one can take your money without you signing to release it. You should call an attorney or at the very least go to small claims and see if you can recover some of your deposit. Find another agent and carry on. Buying a home should still be a priority as now is a great time for home buying. Please do not be discouraged as there are many Realtors out there who will be happy to help you out and keep you far more informed than you seem to have been this time around.
Best of Luck to you,
Connie Bramble
Prudential CA Realty
714-337-8718
0 votes
Toni Anderson, , Beaumont, CA
Wed Dec 22, 2010
Wow! I'm sorry you had such a bad experience! As you have found out and it is a standing rule in Real Estate, all agreements must be in writing. Your earnest money could not be released until you and the seller both sign the documents. It sounds as if your agent and his broker were more interested in just getting the home closed than advising you as to what was best. As for re-negotiating during escrow, it can be accomplished by amendment to the escrow company, but in your circumstances, you were not only under the necessity of the seller but also the sellers lender to sign it off as it was a short sale. You can hold out by not signing the cancellation of escrow if you do not agree to their "reasonable cancellation fee" and try to renegotiate losing your money. Please don't be discouraged. Try to find a reputable Brokerage and continue on your home search. With the correct Realtor and guidance, I'm sure you will be able to find your dream home. Feel free to contact me if there is anything I can do to assist you. ToniAnderson@Tarbell.com
0 votes
TheRECoach, , Orange County, CA
Wed Dec 22, 2010
This kind of situation Sucks, and I cringe every time I hear of them, but it sounds like you are still in Escrow here, and have time to fix it?

I know Consumers have access to so much more info now, than ever before, but there is no substitute for a Knowledgeable and experienced Realtor...ya ya, I know, sounds like a "Sales Pitch", coming from me, but it's times like these (and you are not a rarity, in these times of REO's and Short Sales)

Take your time, do the right thing, and it will all work out...I wish you all the best =)

@CBRELongBeach
0 votes
Mv Buyer, Home Buyer, Mission Viejo, CA
Wed Dec 22, 2010
Well, it would take up way too much time and space to give you the whole story, but here is the short version...
My Agent breached a verbal contract to a commission refund. Agent grossly misrepresented the value of the property we were trying to purchase. Agents evaded and ignored questions about the condition of the property. Agent misrepresented the role of an attorney negotiating terms of a "Short Sale". Agent pressured us to their "preferred" lender. Agent pressured us to sign sections of a sales contract that was against our best interest under threat of loosing the property to another buyer. Agent and Broker misrepresented the sales contract regarding our changing lenders at the beginning of escrow. Agent and Broker tried to blame us for our choice of lender when FHA loan approval failed due to conditions of the property. Managing broker agreed verbally to our request for changes in the terms of the agreement then recanted when we requested new terms be written into the escrow. Broker fully sided with the sellers placing blame on us, the buyers for the cancellation of escrow. Our agent instructed escrow company to issue cancellation instructions without our consent at the direction of the selling agent . Broker/Manager told a direct lie about original signed documents from the seller being required to release our escrow deposit. Managing Broker issued several insulting and demeaning emails and to top it all off, escrow company is charging a (reasonable cancellation fee) of $ 1,000.00. Nice huh? There is a lot more detail of course, but this is our 1st time home buying experience from a dual agency broker with attorneys representing the sellers and broker owned escrow.
0 votes
jo, , Hollywood Hills, Los Angeles, CA
Wed Dec 22, 2010
MV, looks like you got a story behind this. Why dont you lay out the entire story for us, so we can get a better understanding of what happened to you.
0 votes
Steven Ornel…, Agent, Fremont, CA
Wed Dec 22, 2010
Mv Buyer:

Whether Seller, Listing Agent, or Buyer's Agent, if there is knowledge an actual material issue being present it needs to be disclosed. Potential issues, while they may be eventually proven to be benign, are a gray area (personally, I disclose these as well).


"Shouldn't a buyers agent fully investigate a known concern about expired permits and fully explain the possible repercussions to their clients before allowing them to enter escrow on a short sale? Especially when it is a FHA loan."

Actually, it is not the duty of the Buyer's Agent to exhaustively investigate issues; however, in the case of expired permits a Buyer's Agent should be strongly suggesting the Buyer do so and can aid in the effort. Certainly, the risk of expired permits should be discussed no matter where financing is being obtained. Any Appraiser would want to know about potential expired permits as well, as this could affect the valuation of the home as unpermitted work cannot be given value.


“Also, what is the sellers agent's responsibility when they have been told the permits are expired and their clients are misrepresenting the status of the permits?”

A smart Seller’s Agent will work towards uncovering the facts regarding the permits and then advise the Sellers appropriately based on the facts.

Best, Steve
0 votes
Michael Barr…, Agent, Irvine, CA
Wed Dec 22, 2010
Hi there MV buyer, as you can ell by now, it is the agents responsibility to let you kow about any permit issues if the agent is aware of any. Biyers mst invertigate themselves.
Here are the address phone numbers to vall at the City of Mission Viejo
200 Civic Center
Mission Viejo, CA 92691
(949) 470-3000

Open Monday through Friday
8:00a.m. - 5:00p.m.

Building Information 949-470-3054
Building Inspection 949-222-4694
Code Enforcement 949-470-3055
Health Inspector 949-470-3027
Planning and Zoning Information 949-470-3053
Fax 949-951-6176
Email : cs@cityofmissionviejo.org

Hope this helps
0 votes
Joseph Fleis…, Agent, Irvine, CA
Wed Dec 22, 2010
It sounds like you knew, as a buyer, as well. You, as the buyer should have not released contingencies until you were satisifed that you knew the status of the permits, or lack of permits, and you were comfortable purchasing the home. Your agent should have facilitated obtaining any information you wanted to know. If it is a short sale, you were buying the property in an as-is condition, buyer beware.

The Seller and the listing agent need to disclose what they knew about the property. If there is an unpermitted addition, as an example, they should disclose that, if they had knowledge.
0 votes
Anna M Brocco, Agent, Williston Park, NY
Wed Dec 22, 2010
Was the lack of permits disclosed to you--if so, it really should have been up to you to investigate further by checking with the local planning and building's department....
0 votes
Mv Buyer, Home Buyer, Mission Viejo, CA
Wed Dec 22, 2010
The question of the permits was know by both agents for many months during the short sale process. We asked many times for additional information from the sellers.
0 votes
Toni Anderson, , Beaumont, CA
Wed Dec 22, 2010
A Buyer's agent has no other fiduciary duty to investigate expired permits other than to inform the buyer . It woul be up to the Buyer to perform their own due diligence and investigate the expired permits. The sellers agent has the duty to inform the Buyers that the permits are expired IF he knows about it. An Agent cannot delve into a permit investigation unless they are the person who is using or going to use the permit. They cannot get involved with permits for a buyer or seller.
0 votes
Dallas Texas, Agent, Dallas, TN
Wed Dec 22, 2010
Render a virtual opinion w/o reviewing all executed contracts AND part of he said she said statements difficult to make any statement(s) on behalf any party.

It depends on who know what , what was disclosed and etc. Many times buyers agent DON'T know OR listing agents till discovered through the buying process.

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes
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