Sellers Risk Legal Problems If They
Fail to Disclose Property Defects
By David R. Walker
Southland Regional Association of Realtors
Selling a house brings with it a host of responsibilities. There is the yard
to spruce up, paint to be freshened, and closets to be cleaned.
It also requires honesty.
Selling strategies differ, but most Realtors agree that fixing or repairing
deficiencies in a home prior to putting it on the market increases the chances
of quickly getting an attractive purchase offer. Yet issues sometimes go beyond
“curb appeal,” going, instead, to the condition of the property.
In some cases, it may not be financially feasible for a seller to make
needed repairs; in other cases, the lack of time may be an issue. Some sellers
just choose not to do anything additional to make a property more
marketable.
Whatever the reason for not making repairs, sellers are required to disclose
any known problems. This is known as "Seller’s Property Disclosure"
and a document citing such items becomes a part of the sales contract.
What types of things are covered in a Seller’s Property Disclosure
Statement?
Broad categories may include: land/soil/drainage, termites or other pests,
information regarding the roof, structural items, and basement or crawl space
water issues. There may also be questions regarding additions and alterations
to the property, toxic substances, plumbing and water issues, or queries about
covenants, fees and assessments.
Other questions may revolve around the condition or ownership of major
appliances or equipment or if lead-based paint is present on the property.
Responsibilities surrounding Seller’s Property Disclosures should be taken
very seriously. Failure to disclose known information by a seller can result in
serious legal complications. The sale or purchase of real estate is not
a "Let the Buyer Beware" situation. Instead, sellers who conceal
known defects do so at their own legal peril.
Disclosure laws for commercial and residential real estate transactions have
become specific and have developed more teeth in recent years. The intent --
having all parties accept appropriate responsibility and putting nobody at an
unfair advantage -- can merit sellers as well as buyers in that it may be the
key to avoiding costly litigation following close of a sale.
To sellers, disclosure may initially appear to be an added headache.
However, knowing what their disclosure needs are before they put a property up
for sale can help determine what must be done to prepare the property for sale
and can help establish effective pricing within the market.
Even with sellers obliged to divulge what they know about a property and
agents mandated to make visual home inspections of seller properties, buyers
still need to be informed and should enlist appropriate assistance regarding
disclosures in making their purchase decisions.
Disclosures include a law requiring sellers and seller's agents to provide a
Natural Hazard Disclosure Statement form with certain transactions. The purpose
is to disclose whether the property is located in one or more of six disaster
zones. According to information from the California Association of Realtors
there are at least 26 categories of compliance and disclosure that may apply to
residential properties.
The zones include earthquake faults, seismic hazards, state fire
responsibility zones, federal flood hazard zones, very high fire severity zones
and areas of potential flooding in the event of dam failure.
An aspect of disclosure that can be confusing is which laws apply to each
area and laws that are "grandfathered" in.
For instance, an Earthquake Hazards Homeowners Guide must be given out for
homes built prior to 1960. In another example, sellers of homes that are in
Mello-Roos Special Tax Areas must make a good faith effort to determine and
disclose if the home is being assessed special taxes to fund designated public
services. Residences located in dam areas must receive disclosure of Dam
Failure Inundation Zones.
The areas of geologic, seismic, environmental and tax disclosure are
complex. Certain types of public information must be disclosed. "Actual
knowledge" about property problems such as drainage or contaminate
leakages must be disclosed. Remember, a Transfer Disclosure Statement
must be completed by law as a disclosure process taken by the Realtor.
This column is a service of the 11,800-member Southland Regional
Association of Realtors, one of the nation’s largest local associations. Send
questions to David R. Walker via e-mail to DavidR7944@aol.com
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