Seller Beware: Cautionary Tales from a Home Inspector
Being an interior design here in the Philadelphia region means working in an area that relative to certain parts of the country, as held onto its real estate values better than worse in the last number of years. I know a number of you are thinking of putting your homes on the market this time of year. What better help to you I thought, than to ask my friend Vince Tecce, a well respected area home inspector, if he can help make the process a little easier for the sellers. Here’s a great blog post he was willing to guest blog for me, on the critically important issue of a seller’s disclosure. Thanks Vince!
In my years of performing Home inspections, as well as doing related expert witness work, issues related to the Seller’s Disclosure have come up. In a little over a generation the pendulum of the law has definitely swung the buyers’ way. The interpretation of the law regarding sellers now is clearly: Seller Beware.
First some background. Seller’s Disclosures have been around for at least 20 years. Over the years the laws regarding Seller’s Disclosure have been strengthened. The 2000 law regulating Home Inspectors in Pennsylvania, called the Residential Real Estate Transfer Law ( 68 PA C.S.A.), also again addressed the 1996 Seller’s Disclosure law. The wording of this law is very clear in what it requires of a seller in terms of disclosure when selling a property. By the way, this law also regulated Home Inspection in Pennsylvania. Also, Home Inspectors typically will ask to see the seller’s disclosure at the time the Home inspection is performed.
Some Scary Stories
Here are a few examples of what a failure to do a proper Seller’s Disclosure will bring:
To the Extreme:
A person sells his house. Some months after moving, in the buyers have a sewer back up. They call a plumbing service. The contractor arrives and mentions that his records show that they were out at the same properties some 7 years earlier for a sewer back up. The Buyer made a letter of demand to the seller claiming they failed to disclose this issue. The Seller settled for $12,000.
The Truly Deserving:
An attorney I know was handling a case where the Seller clearly failed to disclose a significant siding problem to the Buyer who now owns the property. He mentioned that the Seller’s attorney offered $20,000 to settle a true $30,000 claim. I felt perhaps to avoid further litigation he might accept this. However, he was not at all interested in settling for the lesser amount. When asked about it, his response was “why should I settle for that, when a judge will give me the full amount?” In cases where a seller fails to disclose a problem they obviously knew about, the courts regularly give judgments to buyers for the full amount of the claim. Let me repeat: In cases where a seller fails to disclose a problem they obviously knew about, the courts regularly give judgments to buyers for the full amount of the claim.
A lady sells her house and a very negligent Home Inspection is performed. After some discovery, the Buyer’s attorney finds that the seller obviously lied and neglected to list items in her Seller’s Disclosure. These were somewhat related to what the Home Inspector failed to identify. The result: she went from being a minor party in this case where the focus was clearly on the Home Inspector, and in addition to a great deal of stress and aggravation, also ended up splitting a $175,000 settlement with the Home Inspector.
The Conclusion is Obvious
Since the Seller’s Disclosure is the one document that will survive past closing, if you know about a problem, past or current, DISCLOSE IT! Failure to disclose will lead to litigation that favors buyers. There is something else that can be done to protect a seller. There is a section of the Disclosure law that allows for report by expert – “The delivery of a report or opinion prepared by a home inspector, contractor or person registered or licensed…shall be sufficient compliance for application of the exemption provided.”
Consider getting a Home Inspection performed by a qualified professional before selling the property, and give a copy of the report to the buyer. This will avoid surprises and trouble with the deal, and make a potential buyer more comfortable with buying your property.
INFORMATION REGARDING THE REAL ESTATE SELLER DISCLOSURE LAW
– from Reveal Systems TrueForms
Generally speaking, the Real estate sellers Disclosure Law requires that before an agreement of sale is signed, the seller in a residential real estate transfer must make certain disclosures regarding the property to potential buyers in a form defined by the law. A residential real estate transfer is defined as a sale, exchange, installment sales contract, lease with an option to buy, grant or other transfer of an interest in real property where NOT LESS THAN ONE AND NOT MORE THAN FOUR RESIDENTIAL DWELLING UNITS are involved.
The Law defines a number of exceptions where the disclosures do not have to be made:
1. Transfers that are the result of a court order.
2. Transfers to a mortgage lender that result from a buyer’s default and subsequent foreclosure sales that result from default.
3. Transfers from a co-owner to one or more other co-owners.
4. Transfers made to a spouse or direct descendent.
5. Transfers between spouses that result from divorce, legal separation, or property settlement.
6. Transfers by a corporation, partnership or other association to its shareholders, partners or other equity owners as a part of a plane of liquidation.
7. Transfer of property to be demolished or converted to non-residential use.
8. Transfer of unimproved real property.
9. Transfers by a fiduciary during the administration of a decedent estate, guardianship, conservatorship or trust.
10. Transfers of new construction that has never been occupied when:
a. The buyer has received a one-year warranty covering the construction;
b. The building has been inspected for compliance with the applicable building code or, if none, a nationally recognized model building code; and
c. A certificate of occupancy or a certificate of code compliance has been issued for the dwelling.
In addition to these exceptions, disclosures for condominiums and cooperatives are limited to the seller’s particular unit(s). Disclosures regarding common areas or facilities are not required, as those elements are already addressed in the laws that govern the resale of condominium and cooperative interests.