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May 30, 2017 • Stay Connected!
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QUESTION:  When must a Form 41D - Inspector Referral Disclosure be used, what is its purpose and should it be attached to the buyer's offer?

ANSWER: The Washington Administrative Code requires a licensee who refers a home inspector with whom the licensee has or has had a business or familial relationship, to provide full disclosure of the relationship to the buyer or seller. WAC 308-124C-125(9)9a).
The term "familial" means a family relationship. If agent is or ever was related to the inspector by blood or marriage, that relationship must be disclosed. The term "business relationship" means that agent has done business with the inspector previously, even if unrelated to inspection services. For example, agent may have hired inspector to perform an inspection for agent, agent may have sold property to or for the inspector or agent and inspector may have had some other, unrelated, business dealings between them. The mere fact that agent has referred the inspector to others in the past, or has included the inspector on a list of recommended inspectors, does not constitute a "business relationship" requiring disclosure.
If licensee has a business or familial relationship with an inspector, then when that inspector is referred, disclosure of the relationship must be given. Form 41D is intended to provide the format for broker to make that disclosure.
It should be noted that Form 41D is, however, a DISCLOSURE. It is a disclosure from broker to consumer. In answering the question of whether it should be attached to the purchase agreement between buyer and seller, broker should first answer two questions: what is the purchase agreement and who are the parties to the purchase agreement? The purchase agreement is the contract that establishes the terms of sale between buyer and seller. If a document does not establish terms of sale between buyer and seller, it should not be attached to the purchase agreement.
Form 41D does not establish terms of sale between buyer and seller and should NEVER be attached to a buyer's offer or a purchase agreement. Form 41D is a disclosure from broker to consumer. The purchase agreement (originating with buyer's offer) is a contract between buyer and seller. When extraneous documents, like the Form 41D, are attached to buyer's offer and/or the purchase agreement, those documents create the potential for ambiguities, inconsistencies and confusion and they unnecessarily complicate and lengthen an already long and complicated document. The Form 41D is a disclosure between broker and consumer. As such, it should be retained in the firm's transaction file. It should not, however, be attached to the purchase agreement and it should not be provided to the other party in the transaction. Form 41D should never be identified, on the face of Form 21, as an "Addendum". Form 41D should never be included in the documentation presented to seller/listing agent as buyer's offer.
Realistically, what does this mean? Often, buyer's broker prepares buyer's offer and also prepares a Form 41D and all of those documents are sent to buyer for buyer's electronic signature. Once signed, the documents are returned to broker in the form of a single pdf. That pdf is then forwarded to listing broker as buyer's offer. And ... that is where the problem occurs.
It is not acceptable for buyer's broker to forward the Form 41D to listing broker just because it is part of the pdf that is returned to buyer's broker after buyer electronically signs an offer. Buyer's broker either needs to send the documents to the buyer for signature so that the documents are returned to buyer's broker separately or buyer's broker must break the documents apart once the buyer signs and returns the documents to buyer's broker.
It is important to recall that when brokers prepare purchase agreements, brokers are held to the standard of care of a lawyer. If achieving that standard of care means that broker must incorporate additional steps in order to avoid including extraneous documents with buyer's offer, then broker must incorporate those additional steps.


The Legal Hotline Lawyer does not represent Washington REALTORS or its members. To browse through our database of past Q & A's, visit Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week. Please submit questions to . Please tell us your NRDS number when you e-mail the Hotline with your question.

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In Memoriam: Glenn Crellin
(Source: Runstad) The Runstad Center is sad to announce that Glenn Crellin, former Director of Research for the Runstad Center and long time Director of the Washington Center for Real Estate Research (WCRER) passed away last week at his home in North Carolina. Glenn's work in real estate research was pioneering in its day and ahead of its time. He was instrumental in the establishment of real estate as an academic discipline in the State of Washington. Glenn will be greatly missed by his colleagues at UW and the many people throughout the state who worked with him.  Read more about Glenn in his obituary here.

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QUESTION from 6/23/2016:  Will you please clarify the Exhibit A requirements. I've always understood that a full and accurate legal description is a required element of a binding real estate purchase agreement in the State of Washington. Some of my peers are suggesting differently and say that the requirement is that the Buyer and Seller agree on a legal description even if it may be out of date or abbreviated. Does an old deed with a legal description or an abbreviated legal printed off the County Assessor's website suffice for a binding Exhibit A? If the Buyer and Seller "agree" to the legal description by signing one of those documents does that make the contract binding from an Exhibit A standpoint? What is the liability to the Brokers and Firms for implementing such a policy?
ANSWER:  Once again, industry "legend and myth" create significant liability for brokers and firms. The Washington Supreme Court is very clear. A real estate purchase agreement is not binding if the subject real property cannot be located, precisely, without reference to any extraneous document. Said differently, the complete and accurate legal description must be included as part of the purchase agreement if the purchase agreement is to be binding. If some outside documentation must be referenced, such as a title report, in order to determine the actual legal description of the property, then the agreement is not enforceable. That said, it is absolutely irrelevant, to this inquiry, whether the parties agree to an abbreviated or incorrect legal description. If the parties "agree" that buyer will purchase Lot A from seller but seller actually owns only Lot B, then have the parties agreed to buyer's purchase of Lot B? Not according to the Washington Supreme Court. Or, if the parties agree that buyer will purchase Lot A from seller (consistent with the warranty deed given to seller when seller purchased) but seller's fenced yard includes Lot A and part of Lot B, that seller acquired from neighbor 8 years ago as part of a boundary line adjustment, then has buyer actually purchased seller's house and entire yard area? Not according to the Supreme Court. Buyer may be purchasing only Lot A or the parties may have an unenforceable agreement. There is no way of anticipating how a court would rule between those alternatives but it is certain that the parties do not have an enforceable agreement for buyer's purchase of seller's home and entire yard area, which is what the parties intended. Additionally, if the brokers attach an "abbreviated legal" from the County, then by definition it is not "complete and accurate." The complete and accurate description of the property must be determined from resort to some other written documentation. That may be subdivision records, auditor filings, court records or something else. In fact, it is all the documentation that title companies review when producing the preliminary commitment for title and its attached Exhibit A, legal description. Simply put, the "agreement" of the parties to an abbreviated or incorrect legal description plays no role in this analysis. Since brokers are held to the standard of care of a lawyer when drafting purchase agreements, it is up to broker(s) to insure that a competent (complete and accurate) legal description is included as the Exhibit A to the purchase agreement. It is for this reason that brokers should order a preliminary commitment for title the minute broker obtains seller's signature on a listing. When the preliminary commitment is provided to broker, broker should immediately upload the title commitment's Exhibit A as an attached document to the MLS listing. Then, when buyer broker writes an offer, buyer broker can include the complete and accurate legal description as Ex. A to the purchase agreement. During the few days from the date on which seller signs the listing to the time when the preliminary commitment is available, listing broker should upload the warranty deed given to seller when seller purchased the property. This old warranty deed should be swapped for the preliminary commitment Exhibit A, AS SOON AS POSSIBLE because, as illustrated in the example above, the legal description for the property can change over time and the legal description included on the seller's old warranty deed may no longer be "complete and accurate."

(You will need your NRDS# & password to access the Legal Hotline.)  The Legal Hotline Lawyer does not represent Washington REALTORS or its members. To browse through our database of past Q & A's, visit Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week. Please submit questions to Please tell us your NRDS number when e-mail the Hotline with your question.