Across the Picket Fence - Property Disclosure


Across the Picket Fence


Topics:  Pricing |  Contracts  |  Disclosure  |  Offers  |  Financing  |  Buyers  |  Agents  | Buyer Issues



Seller: My lawyer said a disclosure form wasn't legally required when selling by owner. Why do you (Picket Fence Preview) provide us with one? 

While not legally required, providing the buyer with a property disclosure form actually is in your best interest, primarily because it describes the condition of the property as it is being sold. If the buyer decides to have the home inspected as a condition of the sale, anything that the seller has already disclosed about the property would be considered non-negotiable (there is a clause in the contracts we provide you with which states this).

Another reason to disclose defects is so they don't come back to haunt you in the future. For example, if you know the well water is bad, but don't disclose it, the buyer can sue you for costs associated with remedying the situation, or even force you to take the property back (if it's deemed the property wasn't marketable and therefore had a faulty warranty deed).

Real estate agents require property owners to fill out a property disclosure form so they, the agents, aren't liable for the property's defects. They also carry "Errors and Omissions" insurance, to further protect themselves. What many homeowners listed with agents don't realize is that, if the agent misrepresents their property, either knowingly or in error, the homeowner is usually sued along with the agency -- and the agent's Errors and Omissions insurance doesn't cover the homeowner from the agent's mistakes!


Seller: When showing my house to potential buyers, should I disclose any defects or wait until I provide them with the seller’s written disclosure? 

Answer: You should discuss any material defects with any prospective buyers as soon as they express an interest in your property. Major defects could include a leaking roof, cracked and leaking foundation, malfunctioning septic system, broken furnace, contaminated water supply, excessive heating and cooling costs, etc. Provide written disclosures at the time of signing a purchase and sale agreement with the buyers. Sellers who fail to disclose, or who even attempt to hide material defects are often sued by buyers and face expensive litigation, settlement payments and attorney’s fees.


Q: What is the seller legally required to disclose about the property to the buyer?

Lawyer: The seller has to disclose anything that is undetectable, such as a history of problems (or current problem) with the sewerage system, water in the basement, a hole in the wall that is covered by a wall hanging, burn in the carpet covered by a throw rug, etc. Also, any specific questions that the buyer asks must be answered truthfully. Obviously, property disclosure forms must be filled out truthfully, to the best of the seller's knowledge. The buyer should request a property disclosure be filled out by the seller, and should also have a home inspector evaluate the property.

Recent laws have been passed concerning lead paint disclosure, that will go into effect irequiring that sellers disclose to buyers whether or not the property has been painted with paint containing lead.


Seller: We recently closed on the sale of our home, and were dismayed to have the new owners call us saying they found a few problems (like a leaking faucet), and want us to fix them! I say since the home inspector didn't find the problem, that's their problem! What do you think?


A home inspection is not a hide-'n-seek game. Sellers are legally required to disclose any problem they know of concerning the property. If the buyers decide to force the issue and take you to court on this, you would likely lose the case if it's determined you should have been aware of the problem before the closing. This would certainly be far more costly than simply hiring a plumber to fix the faucet!

Conversely, had you disclosed the leaking faucet before the sale in writing, you wouldn't be in this predicament.      


Seller: What happens if I fill out the property disclosure form and give it to my buyer, and there is a defect in my property that I'm unaware of? Am I still legally responsible?

Lawyer: In most cases, no. However, if the buyer discovers a problem after the purchase that they believe you were aware of, or should have been, they can still sue you. They would then have to prove that it was reasonable to assume that you were aware of the problem.

An example would be if the buyer discovered that the well water had an odor and was undrinkable due to bacterial content shortly after the purchase. Even if you testified that you thought the water was fine and had been drinking it without any health problems, the court might rule that you should have been aware of the odor, and therefore should have had the water tested. You could then be held responsible for correcting the problem and pay all of the buyer's legal fees, or worse, to have to reverse the sale of the property -- i.e. repurchase the property back from the buyer if the decision is that the property was not in habitable condition.

It should be noted that you are no less responsible if a real estate agent is involved in the sale of your home. It is the seller who is responsible to disclose property defects. In fact, if an agent is negligent in disclosing a defect to the buyer that you had made the agent aware of, you are still legally accountable for the omission.


Property Disclosure, Buyer

Q: Buyer: Isn't it risky buying direct from a homeowner without an agent? What if the Private Sale homeowner isn't disclosing the full truth about the property?

No. Since most real estate agents are representing the seller in a transaction, they are not looking out for your interests anyway. They are trying to get the best price for the seller (the exception is the buyer broker, who represents the buyer). However, both agents and homeowners are legally required to be truthful when disclosing facts about the house.

When you purchase a home with the assistance of an agent or on your own, it is quite standard to ask the homeowner to fill out a disclosure form about the property. Whether you are purchasing direct or with an agent, you still must rely on the homeowner to give you the details about the property. Also, you can make your offer contingent upon a satisfactory housing inspection (which you arrange and pay for). The attorney that draws up the Purchase/Sale contract can advise you on this or other matters, and will specify any special conditions of the sale that you and the seller decide upon.



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