Limited Duty of Inspection and Disclosure

The courts of California have long held that real estate broker’s duty of investigation and disclosure is limited to a reasonable visual inspection of accessible areas and disclosure of facts that such an inspection would reveal. In Easton v. Strassburger, the agents conducted inspections of the property and were aware of several “red flags” indicating that the property could have soil problems. The agents did not request a soil study and did not inform the buyers that there were potential problems. Shortly after the purchase, landslides caused severe damage to the property.

The court held that a real estate broker has an affirmative duty to “conduct a reasonably competent and diligent inspection of the residential property listed for sale and to disclose to prospective purchasers all facts materially affecting the value or desirability of the property that such an investigation would reveal.”

Civil Code Section 2079

The Easton holding was codified in Civil Code section 2079, stating that it is the duty of a real estate broker or agent, who has a written contract with the seller to find or obtain a buyer, to a prospective purchaser of residential real property comprising one to four dwelling units to conduct a “reasonably competent and diligent visual inspection of the property” offered for sale and to disclose to that prospective purchaser all facts materially affecting the value or desirability of the property that such an investigation would reveal.  The standard of care is the degree of care that a reasonably prudent real estate licensee would exercise and is measured by the degree of knowledge through education, experience and examination that is required to obtain a real estate license. 

Sections 2079.3 statutorily limit the duty of inspection recognized in Easton to one requiring only a visual inspection, and the statutory scheme expressly states a seller’s broker has no obligation to investigate areas that are reasonably and normally inaccessible to such an inspection, nor an affirmative inspection of areas off the site of the property, or public records or permits pertaining to title or use of the property. 

The legislature intends to protect the home purchaser from latent defects, such as the instances in Easton, but without placing an undue burden upon the real estate agent and broker.

Code of Ethics

The National Association of Realtors also amended the Code of Ethics so that it limits a realtor’s duty to discover only those adverse, non-latent factors that are reasonably apparent to someone with the expertise required by their state licensing authority. The pertinent section reads as follows.

Article 2
REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law.