So often when I am doing the paperwork for a listing, the seller complains about filling out the disclosure statement. They whine because they are selling the property “as is”, so why do they have to disclose anything, which is the opposite of the point of disclosure. They ask me to fill out the form and let them sign it, which means if they don’t tell me the facts correctly, I’m the one in trouble because I filled it out. Or they reluctantly agree to fill it out and send it to me, and then somehow just forget to do that.
I can’t overstate the importance of full disclosure in real estate transactions. Aside from the moral implications involved, there are other serious consequences for those who lack morals. Many states legally require disclosure statements to sell any property. Georgia does not require the form, but does require disclosure of material defects, or any other negative factors.
First, it’s the law. I’m pretty sure I would not look good dressed in orange or striped outfits all day long. The seller is liable for not disclosing material defects, and so is the broker. If you know you have a crack in your foundation, failing to point that out can be construed as intentional misrepresentation, which is fraud (otherwise known as the “F” word because of the serious consequences). If you told me there is a crack, and I told a potential buyer otherwise, I could be charged with fraud. Then there is something called negligent misrepresentation, which is when a broker should have known that a statement about a material fact was false. If you told me there was no foundation crack, yet I saw one while walking around the house, I have to point out what I think might be a problem, or I’m in trouble. I’m not an attorney, but I know how to avoid getting in trouble, and it basically boils down to telling the truth, confirming the truth, and discovering the truth if you feel suspicious.
The second reason to disclose has to do with good marketing practices. I recently had a seller fill out the complete seven page disclosure statement, then provide an additional four typed pages of explanations and details they felt were important for potential buyers to know. Some was negative and some was positive information. As a potential buyer, would you feel more comfortable with a disclosure that said there was a crack discovered in the foundation, but upon discovery it had been professionally repaired by the Solid Foundation Company … or having your inspector find a crack that was not disclosed, was poorly patched up, or hadn’t been discovered? Having a receipt for the repairs also helps bolster confidence. The more buyers can feel confident you are forthcoming and honest in your dealings with them, the more they will relax and try to cooperate during the selling process. It can sell your house more quickly. Since we got full price for the subject property, it can also improve your bargaining position.
Then comes the subject of “stigmatized” properties, where someone died, was the victim of a violent crime, had a communicable disease, etc. Do you have to disclose? Yes and no. That is the subject for another article, or for your Realtor® to answer.
If you know nothing about home maintenance, or have little knowledge about finding problems with your property, or just want to feel more comfortable, it might not be a bad idea to engage a home inspector to give you a report on potential problems that might arise during the due diligence period. The buyer will almost certainly perform his own inspection, but if he feels confident that your inspection was thorough and the repairs were done properly, he may not inspect it himself. Either way, you can avoid unexpected surprises that way.
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