Do agents have to disclose nearby construction projects to buyers? The clear, black-and-white answer is… kind of! As you’d expect, some states require more disclosure than others. For example, in North Carolina, the Real Estate Commission requires disclosure of any upcoming construction that has been publicized in the media. Of course, this means that North Carolina buyers end up signing a slew of documents essentially saying “Yes, my agent has made me aware of 5,000 construction projects I don’t care about.” In other states, like California, agents are only required to disclose proposed construction that they already know about. This means that they are explicitly not required to identify proposed construction or development in the area around the property that they do not already know about. The California Department of Real Estate’s Reference Book states that a real estate agent’s required evaluation of a property for a client “does not include an affirmative inspection of areas off the site of the subject property, or public records or permits… (Civil Code § 2079.3).”
So, does this mean that agents do not need to bother with upcoming construction projects? Not necessarily. Though most states do not require a real estate agent to search for upcoming construction projects as part of their fiduciary duties to their clients, there are situations where this isn’t exactly true. For example, if a client specifically says that they will not buy a home near any large construction projects, this client has just made proposed construction a material fact in their property purchase. Though it’s best to direct the client to city planning department websites and other government sources, a gray area exists regarding your responsibilities as their agent. If you don’t do a basic search for nearby upcoming construction projects after your client made construction a material fact, and it turns out there is a major nearby construction project planned that you could easily have discovered, you’re practically screaming to be sued for breaching your fiduciary duties.
It’s not easy to direct your client to experts they can hire to assess upcoming construction, since this information is usually publicly available online. Do you know many inspectors specializing in looking online for construction projects? I don’t, but this does sound like an amazing profession. Although you should direct clients to conduct their own research on this topic, you should also search for planned construction yourself to cover your bases. If you do this, it’s a good idea to have the client sign a document stating that they are aware you are not a professional in local construction and city planning. It’s in unique situations like this that your responsibilities become somewhat blurry. As with everything in real estate, you need to make clear that you are not an expert, but you also need to fulfill your fiduciary duties to your client. This is where it’s helpful to think of how home inspectors handle portraying their expertise to clients. Non-real estate professionals often assume that if an inspector doesn’t find evidence of a problem, that no problem exists. This is why inspectors have clients sign documents stating that they know the inspector is only reporting on superficially observable conditions, not on hidden issues.
Similarly, a real estate agent must do their best to discover issues for their clients, but also make it clear that they are not giving an expert opinion on things like zoning, appraisal, inspection, etc; agents should simply point to where an expert might be needed. It’s not that an agent should never research for their clients; that said, they must be extremely clear about the limitations of that research, and preferably get clients to acknowledge their awareness of this in writing.
