|Telling all about your
By the late 1980s, state legislatures began to
codify property disclosure as a natural extension of consumer-protection
laws. As a result, any home seller, whether represented by a real
estate agent or selling "by
owner," can be legally liable if a state's disclosure requirements
Today, most brokers use some form of seller disclosure
to protect their sellers and themselves, even in states where it
isn't required by law.
"The state doesn't necessarily cover some of
the areas that the industry feels are problematic, so what you're
seeing is state Realtor organizations developing forms that go further
than the state-mandated forms," says Taraszki. "Some states
require that you use only their forms; in other states, such as
Pennsylvania, the state form is considered the minimum requirement."
The federal government also chipped in a nationwide
disclosure requirement under the 1992 Real Estate Disclosure and
Notification Rule that requires all sellers of homes built before
1978 to disclose the presence of lead-based paint.
See you in court
So what does it all mean if your buyer drags you into court?
"It depends," says Ralph Holmen, National
Association of Realtors associate general counsel. "If the
seller completes the form and outright lies, that clearly is going
to be a problem; that's just flat-out fraud. Similarly, if the broker
knew that a misrepresentation was being made, he or she could be
"If, on the other hand, the seller simply made
a mistake, there may or may not be culpability."
Most successful civil actions result in a monetary
award to correct the problem, and some states allow the buyer to
collect legal fees, says Holmen. In extreme cases, courts have given
the buyer the option to rescind the transaction and even recover
sale-related costs such as lender's fees.
NAR is so bullish on disclosure that it has included
it in its code of ethics, regardless of state law. Not all real
estate professionals are Realtors, however, and not all Realtors comply with the code.
"One, it helps equip sellers and brokers who
represent sellers to defend themselves when the buyer claims he
was not told something or was told something incorrectly; there
is a record of what the buyer was told," says Holmen.
"Also, when you provide that information fully
and early, you avoid problems completely. The buyer knows
what he's getting so there isn't any litigation at all."
Buyer (still) beware
Sounds great in theory. But buyer-broker Tom Wemett, president
of the National Association of Exclusive Buyer Agents, says practical
application is less than precise.
Oftentimes, agents adopt a don't-ask, don't-tell attitude
just to secure a listing.
"What happens is that listing agents go into
the property with blinders on; they don't want to know about that
stuff. They hand the seller the property condition disclosure form
and say, 'Get this back to me so we can provide it to the buyer.'
The problem is, sellers never fill out the form correctly,"
There also are those within the industry who feel
that mandatory disclosure is simply a big waste of time. Sellers
are asked questions they are unqualified to answer (Underground
storage tank? Infestation?). Mandatory disclosure also gives agents
and brokers only the illusion of legal protection. Buyers would
be better served, they say, by a thorough
property inspection and an extended home warranty.
Jay MacDonald is a contributing editor
based in Mississippi.