Banks Selling Homes – See No Defects, Hear No Defects, Speak No Defects

Yesterday afternoon I ran into a bit of a conundrum. With the inspection complete on a bank owned property in Tempe, my buyer decided either the bank was going to need to lower the price (not normally a contractually allowed request in Arizona, unlike other states) or move on to the next property.

The listing agent indicated we would need to provide a Buyers Inspection Notice and also provide specific details regarding the reasons for the request (and not just “the buyer wants to pay less” – the agent’s words, not mine.)

To my mind, there would be no better way to document the issues we’re raising than the inspection report. Except, the mere suggestion that the report was going to be e-mailed was greeted with the same enthusiasm as a truckload of nuclear waste.


There’s a reason the lenders selling bank owned properties and their asset managers don’t want to see the inspection report – once they’ve seen it, they could be considered aware of material defects in the property.

(Legal aside number one – I’m not an attorney. I’m not providing legal advice. I am only speculating based on what I have learned and would welcome a real legal perspective to tell me I’m right.)

Where was I … oh yes … we wouldn’t want the lenders to actually be aware of what’s wrong, right?

But what of the listing agent? If memory services, there’s an odd threshold in Arizona regarding disclosures required of real estate agents … if it’s something a reasonable person would know, the agent would need to disclose … the wording’s not exact, but in essence if as an agent there’s a hole in the wall and a gap where the copper plumbing should be, it’s difficult to argue you didn’t “know” there was a problem.

(Legal aside number two – that’s not the best example, since it would be likely the buyer ought to have noticed such a thing as well. The intent is to prevent agents from pretending an obvious material defect doesn’t exist and keeping their fingers crossed that the buyer doesn’t notice.)

Here’s where I start to wonder … if the listing agent has been sent a copy of the inspection notice, can the agent really argue he or she is unaware of any material defects if the transaction falls through and another buyer comes along?┬áIs sticking one’s head in the sand, ignoring the information in front of them, truly a viable method of avoiding liability?

Maybe the answer is yet, which would render this post pointless (mah nishtah nah on that score.) But it does tend to make a sleep- and caffeine-deprived mind curious.

Image: Darren Robertson /

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at