In February 2023, the Arizona REALTORS® provided a new benefit to its members called Breeze that allows disclosures like the Seller’s Property Disclosure Statement (SPDS) to be completed electronically.  Breeze disclosures are fast and straightforward for sellers to complete and provide security measures to help mitigate risk of potential liability to the agent. Specifically, Breeze ensures that whenever the listing agent is in possession of the SPDS, it is locked, thereby guarding against any allegation that the listing agent completed the form in whole or in part.

So how does Breeze affect the listing agent’s obligations to their client and other parties?  In short, the listing agent’s duties regarding disclosures remain the same whether electronic disclosures are utilized or not.

Duties to Seller:

Under Article 1 of the National Association of REALTORS® Code of Ethics, a listing agent pledges to protect and promote the interests of their seller client.  This pledge is mirrored by Arizona law which obligates the listing agent with a fiduciary duty to act in their seller’s best interest.  See Arizona Administrative Code R4-28-1101(A).  A seller has a legal obligation to disclose defects of the property they are selling.  See Hill v. Jones, 151 Ariz. 81, 725 P.2d 1115 (App. 1986).  The SPDS is provided to help the seller make their legal disclosures and the listing agent should ensure that the seller independently completes the form.  Best practice would include educating the seller about the importance of their disclosure obligations and the need to block off adequate time to recall all repairs and gather all paperwork. 

It is also prudent for the listing agent to stress to the Seller the importance of answering all questions thoroughly and accurately.  This means not guessing and providing an explanation whenever necessary.  Although these recommendations are redundant to the Residential Seller Disclosure Advisory and Message to the Seller on the SPDS, reiteration and examples may prove helpful.  For example, if the seller was told the roof was 3 years old when they purchased the property a year ago, they should just state those facts.  It is not truly accurate for the seller to state the roof is 4 years old because they have no personal knowledge of that fact.  Furthermore, if the seller’s roof was partially re-shingled 2 years ago, a thorough explanation of all facts is the best course of disclosure.

Once the seller has completed the SPDS, it is best practice for the listing agent to review the disclosure to make sure it aligns with the listing agent’s personal observations of the property or what the seller may have shared with the agent at time of listing.  The listing agent has no obligation to discover hidden defects and typically lacks any specialized contractor knowledge to identify defects.  See Aranki v. RKP Investments, Inc., 194 Ariz. 206, 979 P.2d 534 (App. 1999).  But if adverse conditions are apparent, they should be disclosed whether the condition is material or not.  Best practice would be for the seller to revise their SPDS if needed.

Duties to Buyer:

As discussed above, it is in the seller’s interest to make sure they have fully and accurately disclosed all conditions of the property in the SPDS.  Regardless, the listing agent has independent obligations of disclosure.  Under Article 2 of the National Association of REALTORS® Code of Ethics, a listing agent shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property.  This obligation’s counterpart in Arizona law requires the listing agent to disclose all material defects existing in the property and to deal fairly with the buyer.  See Arizona Administrative Code R4-28-1101(A) and R4-28-1101(B)(3).  Thus, if the SPDS fails to disclose all defects or misrepresents the true condition of the home, the listing agent must make an independent disclosure or correction themselves.  If the listing agent must do so, they should follow the same guidelines for sellers answering the SPDS: 1) Disclose truthfully and accurately; 2) explain as necessary; 3) if personal knowledge is lacking, fully explain the circumstances; 4) provide supporting documentation if applicable; and 5) if passing along information, identify the source. Notably, in Aranki, the Arizona Court of Appeals held that a listing broker is not liable to the buyers for passing along information obtained without proof that the listing broker knew or should have known that the information might be false.

As technology advances, some tasks become effortless and routine.  But as REALTORS®, it is important to be vigilant in adhering to our standards and ethics.  Passing advisories or forms back and forth without explanation or review violates our duties whether they are electronic or hard copy. 

Aaron M. Green, Esq., a licensed Arizona attorney, is the General Counsel for the Arizona Association of REALTORS®.  This article is of a general nature and reflects only the opinion of the author at the time it was drafted.  It is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.