Buying or Selling a Home/Disclose?

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Expert: - 2/24/2011


Question
QUESTION: Hello Mr. Menard:
I'm a Realtor that will soon make an offer for a buyer on a short sale home in Gold Canyon, AZ.  The home has around 1,300 square feet, according to MLS/Tax info.

The home has an Arizona Room that looks like it was added after the home was built.  This room is around 10 by 20 square feet.  I don't think the selling agent or the owner is aware of this, but it's pretty clear that the room was added after the home was built, and that the extra square feet is unaccounted for in MLS/tax info.  (The owner is not the original owner.)

Since the short sale's approval is in the hand's of the bank, and the bank probably has no idea that the size of the home is likely larger than the reported 1,300 square feet (which, I assume, could make the property more valuable if known), should that be disclosed somehow to the bank?  This question is a bit silly, since it could be to the buyer's financial disadvantage if it is disclosed.  However, maybe this is an ethical question, not just a financial question.  If it should be disclosed, what is the proper way to do it?

Thanks!

ANSWER: Hello Frankie - Customarily when a covered patio is enclosed into a sun-room and the sliding door removed there is a step down from the main portion of the home to the level at which was the original patio slab. This red flag immediately indicates that it was not part of the original square footage of the home. Also, there is usually no heating or cooling provided from the main HVAC unit, another red flag. Therefore, based on your description, the patio/sun-room should NOT be included in the square footage and should not be included in the assessor's record either. On the other hand, if it was incorrectly included in the square footage (MLS) or made part of the Assessor's record, you would be obligated to disclose to your client that the square footage probably is overestimated and if using square footage as a calculator for determining the offer price they may overvalue the home and possibly their offer. Finally, for others reading this post, Arizona law requires that all communication between parties to a real estate transaction must go through the seller representative and/or buyers representative and not directly between the parties unless that party is not represented. As far as your concern for whether it would be ethical or not, the only "ethical" violation to a member of the National Association of REALTORS would be one that violates the NAR Code of Ethics specifically Articles 1 through 17, therefore this might be considered more a moral dilemma and not ethical... real estate speaking. I hope this answers your question to your satisfaction. If you have further questions please reply to this post. - Todd Menard

---------- FOLLOW-UP ----------

QUESTION: Thanks for the fast and GREAT response, Todd.  It sounds like the bottom line, as you've described it above, is that the square footage of an Arizona Room should NOT be counted when determining the size of a home.  Is that correct?

Answer
Hello Frankie - It can only be included if it was done by a licensed contractor with all applicable city permits and it is heated and cooled by the mail system or a separate heat pump or HVAC system.. not a window mounted ac system. Most of the time the square footage of a patio turned into Arizona room is not included.  - Todd

Buying or Selling a Home

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Todd C. Menard

Expertise

National Association of Realtors Code of Ethics and Professional Standards * Contract Questions: 05/05 Arizona Real Estate Purchase Contract, Exclusive Buyer Broker Contracts, Listing Contracts and associated contract documentation as it relates to boilerplate, covenants, contingencies, procedures and procedures. * ARMLS Arizona Regional Multiple Listing questions * Real Estate Professional Standards and Practices, Ethics, Obligations, Duties * Agency relationships in Arizona, Procurring Cause * Questions typicaly arising during the listing period * Questions typically arising during the escrow period * Questions about working with a real estate agent/REALTOR * Questions Related to New Home Builders

Experience

National Association of REALTORS Board of Director (2011) Arizona Real Estate Salesperson License (1991-1995), Arizona Real Estate Brokers License (1995-Present), Arizona Association of REALTORS Board of Directors (2008-Present), Arizona Association of REALTORS Professional Standards Committee (2008-Present), AAR Certified NAR Code of Ethics and Professional Standards Instructor, Southeast Valley Regional Association of REALTORS President-Elect (2011) Southeast Valley Regional Association of REALTORS Board of Directors (2008, 2009), Southeast Valley Regional Association of REALTORS Grievance Committee Chairperson (1998-2007), Southeast Valley Regional Association of REALTORS Bylaws Committee (2008-Present), Southeast Valley Regional Association of REALTORS Education Committee (2008), Arizona Association of REALTORS Forms Committee - Residential Purchase Contract (2005), Arizona Association of REALTORS Forms Committee - Residential Rental Agreement (2008), Arizona Association of REALTORS Forms Committee - Buyer Broker Agreement (2009), Arizona Association of REALTORS Presidents Advisory Group, Road to Professionalism (2009), Arizona Association of REALTORS GRI Curriculum Review Committee (2009), Arizona Department of Real Estate, Commissioner's Education Advisory Group Sub-Panel B (2010) Arizona Department of Real Estate, Commissioner's Statute and License Review Committee (2007)

Organizations
National Association of REALTORS, Arizona Association of REALTORS, Arizona Real Estate Educators Association (AZREEA), Arizona Regional Multiple Listing System (ARMLS), American Notary Association, Southeast Valley Regional Association of REALTORS (SEVRAR), Southeast Valley Regional Association of REALTORS Women's Council of REALTORS (2010-Present), Phoenix Association of REALTORS (1994-2000, 2005-2009), Scottsdale Association of REALTORS (1994-2000, 2005-2009), Maricopa/Glendale Association of REALTORS (1994-2000, 2005-2009),

Publications
"Real Estate in 2008"- Lifebushido Publishing (Contributory Author), SEVRAR Magazine, Internet Crusade, RealTown ListServe, Blogger.com, Active Rain

Education/Credentials
- AAR Certified Ethics and Professional Standards Instructor, Graduate REALTOR Institute (1993), Certified Negotiation Expert (CNE), Over 100 Hours of annual real estate continuing education, Annual Ethics and Professional Standards Development Workshops as required by the National Association of REALTORS, Approx. 36 hours of NAR Code of Ethics training annually, Numerous IDW, Seminars and Train the Trainer programs, Business Management Degree - 1981

Awards and Honors
2009 REALTOR of the Year Award, Southeast Valley Regional Association of REALTORS (10,000+ Members), Double Platinum Production Award ($45,000,000 Sales Volume)- Keller Williams Realty Int'l (2001), Top 15 Sales Production Keller Williams Realty International (2001), Top 5 Sales Producation Keller Williams Realty Southwest Region (2001), Top Recruiter Award - Keller Williams Realty Int'l, SW Region (2002), Who's Who in U.S. Executive (1983), Who's Who in U.S. Real Estate Professionals (2007)

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