When Selling Your Home, Disclose All!
If you're putting your home on the market, better be sure you're ready to tell all - good and bad.
"The majority of lawsuits or claims that occur are as a result of buyers finding out about something that is wrong with their property after the close of escrow and coming to the belief that the seller knew but didn't tell them," says real estate attorney Peter Solecki of Winton & Larson, LLP.
Disclosure is vital. In one extreme case, it may have spared a seller from going to jail and even saved lives. The New York Times reported on a trial in the late eighties that found the seller of a home guilty for not disclosing to the buyers that the home's heater had malfunctioned. The buyers and one of their children were asphyxiated by fumes from a gas-fired heater used to de-ice the driveway of their home. Only their 4-year-old child survived. The seller was convicted of involuntary manslaughter.
This case is believed to be the first of its kind where a home-seller was held criminally liable for the sale of a home that had a fatal defect.
While certainly this isn't a typical scenario, it gives good reason to pay attention to the details that you're disclosing when selling your home. It's not worth it to leave off some important details just because you think the home won't sell or will sell for less money if you disclose any problems.
Reporting problems about your property prior to the sale of it can be done through various reporting mechanisms such as the Transfer Disclosure Statement (TDS). But Solecki says some disclosure reporting statements are written in the present tense, which creates a reporting dilemma for some sellers.
Buyer Can Decide
"The seller will look at the Transfer Disclosure Statement and say, 'Well, there was something wrong but it's not any more; therefore, I don't have to disclose it," Solecki says. He adds, "If [sellers] haven't disclosed it and it turns out to be a problem, then you have a potential significant issue, whereas if it's been disclosed, then the buyer can elect what to do with it."
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Chances are buyers won't decide to do anything further, Solecki says. He says this is because the problem has been disclosed by the seller and reported that it's been fixed. This will allow the buyers to feel that the problem has been completely resolved and therefore will not hold up the sale of the home.
Reporting all problems with the home, regardless of whether they have been fixed, is the safest way to sell your home. Making sure you keep good records is vital because, as the years pass, many sellers forget about all the repairs they've done to the property.
"Every homeowner should have a file of everything they do to the house," Solecki says. This file should be given to the buyers for them to review. The file should show all problems and how they have been repaired, complete with receipts.
Solecki says this is a step above what many states require a seller to do.
"Even though legally there's no real requirement to tell about fixed problems, those are as critical as the existing problems." He says when you don't report a problem, buyers generally learn about it from neighbors and then assume that you were not telling the truth when you sold the home. Fortunately, Solecki says most buyers tell the truth.
But many sellers resist disclosing problems for fear that their homes won't sell. "That's the fallacy. People think if I tell the truth about my house, a buyer won't buy," Solecki says. But he says if you sell the home with a problem and the buyer finds out after the close of escrow, the buyer will likely file litigation to resolve the problem - creating a huge headache.
If the seller properly discloses all issues with the home, the buyer can make an educated decision to buy or not. "The fact is that the vast majority of buyers don't walk away. They decide to buy a house because they've determined it's the house for them. Once they've made that decision they usually find a way to make it work," Solecki says.
Disclose Right Off the Bat
When's the best time to disclose? Right away. "The good real estate agents will get whatever negative information there is out there as fast as possible. Once buyers make a decision to go forward they will have made their decision based upon all these factors, including that one," Solecki says.
When you tell all before you sell, you're positioning yourself not only for a successful home sale but also a headache-free post sale. "[Not disclosing information] is the primary post-close-of-escrow issue because that's what leads to significant damages, which is what leads to lawsuits," Solecki cautions.
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