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To Disclose or Not to Disclose, That is Not the Question

Ghost I recently read a column in our Hawaii Association of Realtors newspaper talking about calls they receive on the legal hotline. The focus of the article was about whether you should disclose or not certain facts.

First let me disclose that I am not an attorney and as such will not give out any legal advice. What advice I will give is a bit of old fashioned common sense.

To start with in Hawaii our State Law requires that seller's of residential property disclose all material facts. A material fact is basically anything that might affect the buyer's decision to purchase. Chapter 508D, Hawaii Revised Statutes defines a material fact as: "any defect or condition that is past or present that would be expected to measurably affect the value to a reasonable person of the residential real property being offered for sale". The exception would be that our state law forbids the disclosure of whether or not the person or persons inhabiting the property have Aids or HIV. It is also not required that you disclose the existence of ghosts. (I know that will start a few side discussions for sure).

This is how I explain it to my clients. In Hawaii there is no such thing as "Buyer Beware." The buyer of residential property is a protected class of citizen. If the seller's or either agent knows a material fact about the property they need to disclose it.

I had sold a property not long ago where there was a suicide a couple of owners ago. We were in escrow and a neighbor came up to me and asked, are you selling the townhouse that the guy killed himself in? Ooops, that is something we may need to disclose. I met with my client and went through her papers from when she bought the place and there it was. The previous owner disclosed the death to her. My client's response was; "I kind of remember something like that, but it didn't matter to me." I immediately contacted the buyer's agent and we presented them with an amended seller's disclosure. Their client didn't care either and we completed the sale.

Now I have never sold a home with ghosts, but if I ever do..... I will recommend that my client disclose, even if the law does not require it. Once you disclose and the other side accepts you disclosure, it is off the table.

I have found only one way to address material facts: Disclose, document and get all needed signatures.

If you have to ask then you need to do one of the three things listed above.

In Hawaii we as agents are not allowed to fill out the seller's disclosure for our clients, but we can go over it with them.

Agent: Mr. Seller didn't you tell me you have a broken water pipe last month, the roof was repaired and there was some mold in the bathrooms?
Seller: That may scare away buyers.
Agent: You need to disclose it.
Seller: I do not want to disclose that, it will negatively affect the sale of my home.
Agent: Mr. Seller you and I are required by law to disclose all material facts.
Seller: Mr. Realtor, you are supposed to represent me and I do not want that information let out under any condition.
Agent: Mr. Seller please put down you pen. I can not take this listing from you. Thank you for your time.

If I have a potential client who does not intend to disclose material facts I will not take the listing. If I have the listing and later find the client is trying to hide material facts and orders me not to disclose. It is time to seek legal advice.

One of my most commonly used phrases when it comes to disclosures is "The Truth Will Set You Free."

Posted by Randy L. Prothero - Hawaii REALTOR® on 02/28/2007 08:49 AM

Comments (40)

real estate, disclosure, hawaii, mililani, century 21, ghosts

Originally posted at: Hawaii Randy's Real Estate Opinions: To Disclose or Not to Disclose, That is Not the Question

This post has been included in Hawaii Information

40 Comments on To Disclose or Not to Disclose, That is Not the Question

FEB

2007

Last week I made a recommendation to the Hawaii Association of Realtors in regards to the Sellers Real Property Disclosure Statement (SRPDS). Currently the contract allows for the buyers agent to grant "X" amount of days "buyers choice" to the seller to provide the SRPDS. Not only is this something that is known by the seller when the listing is taken but it is a document that needs to be provided before the C-51 Property Inspection should take place in order for the inspector to focus special attention on the areas identified in the SRPDS. It makes no sense to grant the seller 10 days to provide the SRPDS and then ask for 10 days to perform the C-51 property inspection. So what happens if you dont get the SRPDS until late on the 10th day? My suggestion to HAR was that the SRPDS was taken at the time of listing and provided to the buyer immediately after acceptance of offer. If during the time that the property is on the market something changes that would warrant an updated SRPDS, then the sellers have the responsibility to amend the dicslosure statement.

Now if I could just figure out a way for the owners of investment property to not use the "If not owner occupied, date of Seller's last visit.................." as a COP OUT!!!!!!!!!!! When I am representing buyers that block is frustrating because the whole form is filled with "NTMK" (Not to My Knowledge) or "NA".

David - I agree the seller's disclosure should be given ASAP upon acceptance. I try to get it up front from my buyers. If there is something in there that may be a deal breaker, let's get it out of the way.

I saw the draft of the new Hawaii DROA (will be called the purchase contract). It had fixed amount of days for a couple of items and I think the Seller's Disclosure may be one of them.

When we bought our home, the owner checked NTMK on everything. Their Realtor managed the property, so I requested the Realtor disclose what she knew. That got the agent (a PB) all upset. I had to remind her that the law required she disclose all material facts.

Randy, there is a lot more to lose by not disclosing then there is by disclosing. The way I look at it is no loan is worth me losing my reputation.

FEB

2007

George - I agree, no transaction is worth our reputation. I am amazed by those who do not get this.

I agree...after all part of our code of ethics..is to treat ALL parties fairly, not just the one we might represent.

Thank you for the post. I appreciated the fact that if you know of something that needs to be disclosed and the buyer refuses to disclose said fact, that you will, as you should, walk away from the listing. That can only keep your reputation high in the RE community.

On the Flip side of disclosure one could make a case of damage or potential to the Seller on disclosing facts that are not required. As in the Ghost Issue.

When in doubt, disclose, disclose, disclose. Same for Missouri, the seller must fill it out. If they aren't capable, they need to call a family member or friend to fill it out, in no cirumstance are we to write on the SD.

It's interesting to me that you have to disclose suicides but you don't have to disclose if someone had AIDS. A suicide isn't going to do anything physically to the property. It can't harm you. They say that HIV is not able to be spread via external contact but I really don't think that they've done enough studies to make me feel totally comfortable. What if they are wrong? Call me paranoid but I don't want to be the first example to prove them wrong.

Good Post Randy, it seems that your state is pretty much in line with Maryland.

Gary

Randy- true story.. I had one fall out because of a poltergist.. seller disclosed that they had one and weren't sure if it would move with them to new home... buyer backed out...

Randy I agree! Kaye, How strange! What a great story.

I have a question: If your client suspects something negative, and if it were a fact it would be a material disclosure, but has no facts only suspicion, should that suspicion be disclosed?

Randy,

I totally agree. Having one property listed that was previously a drug-manufacturing site, another one in our office that was the site of a suicide and a buyer interested in a property that's had two fires in it....it seems this is a pretty IMPORTANT part of my JOB. Disclose, disclose, disclose already. Great post!

Many have used, and often honestly, the cover my backside formula: "To the best of his/her knowledge, the Seller(s) is not aware of any defects....et" Randy this is so important, specially for newer agents who are dying to do anything to get a listing. Great blog.There is no 2 way about it.Disclose.You might become liable.Not to mention the seller(s) could also be sued.Honesty is always the best policy.Disclose! Does not do much for your name either if you don't.

If the seller is willing to hide something like that it makes you wonder what else he or she would be willing to pull during the transaction. We have enough stress without adding to it!

Hey Randy, when you get one with ghosts be sure to ask if they are friendly, the buyer will want to know, lol.

laurie

Randy - Our State Property Disclosure used to have ghosts listed on it. It has since been removed.....

When in doubt, DO IT! Disclose, that is. If it's something that may effect whether the person will buy that property or not, disclose. There is so much more to be lost by not disclosing - more than I'm willing to risk.

There's always 'The Golden Rule" - and if I were to be the buyer, is this something I'd want disclosed to me.....you can't ever go wrong with those thoughts in your mind.

AnnCummings.com

The best policy, if there is any questions, is to disclose. It is better to protect yourself as the agent and the seller by over disclosing. I have not meet anyone that has ghosts yet so I am eagerly awaiting that discussion.

Disclose!! If you don't it will come back to bite you!

In response to Tim's comment about "not having to disclose if someone had AIDS." In NC, not only do you not have to disclose that but it is illegal to disclose it. We are taught in C.E. to respond to AIDS questions with, "I am not allowed by Federal Fair Housing to discuss that."

Do unto others...

Wally - Fairness to me is so critical.

Roger - If you don't walk away you are asking for big trouble.

Herb - I recommend my clients make those disclosures. If they are available I can try to get a disclosure from the ghost. LOL

Angela - I have had customers ask me to fill it out. The answer is always the same. No, I am not allowed to do that.

Tim - We have no choice. The Hawaii Civil Rights Law is strictly than federal fair Housing and it forbids us to disclose Aids and HIV. They are a protected class under our law. We are not required to disclose death, but murders and suicides. I think the thought is that many people would consider that a material fact.

Gary & Mary - Thank you, our housing laws are among the tightest.

Kaye - That is wild. I have not had one yet.

Vickie - That was a great story.

Kelley - That falls in the gray area. If they have knowledge they must disclose. I always recommend when in doubt disclose.

Kelli - Those are great examples of need to disclose. Those sellers who withhold that information are what lawyers live for.

Lloyd - We have four pages of check boxes on our seller's disclosure forms. You can answer: YES, NO or NTMK (not to my knowledge). Every yes has to be explained further down the form.

Shari - I can deal with high maintenance clients, but I have no patience for dishonest ones.

Laurie - I have not had one, but there was a classic story the lawyer from the board of Realtors shared with us. It is a famous house that is considered the most haunted home in Hawaii. His clients were the owners. They could no sell the home (it was on the ghost tours bus rides and everything). After doing some research they found that the home was part of a radio show Halloween prank many, many years ago and it was never haunted to begin with. I have local friends to this day who will not even drive past it. There are more legends about this home that you can count.

Ann - If it may impact their decision to buy than disclose it whether required or not. They can always find another reason to cancel or sue you.

Patrick - I think it might be a selling feature for some.

Virginia - You have to not only know the Federal, but the State Laws. Our Hawaii Civil Rights Laws add several more protected classes.

Interesting post Randy. It definitely makes one think. I know I would want to know if I were buying a house under the same circumstances I would want to know! However after checking our disclosure form here in Texas it is not required to disclose suicides. The disclosure specifically reads "Any death on the Property except for those deaths caused by: natural causes, suicide, or accident unrelated to the condition of the property." Not only would you not have to disclose suicide but would also exclude an AIDs related death

As our company attorney has said, disclose, disclose, disclose. A seller's disclosure is required (in more types of transfers) here and we, too, cannot assist in completion. I also would not accept a listing if the seller refused to disclose information that needed to be shared - too many risks, violates the COE, etc.

Randy, great blog! Thank you!

I have a simple rule about disclosing "If you are even thinking should you disclose it or not, YOU SHOULD" One can't be careful enough.

Danny - That is State by State issue. In Hawaii the language about what to disclose makes you lean towards disclosing anything you can.

Jeff - That sounds like the best way to go.

Sonja - I tell people if you have to ask, you already know the answer.

As I have confessed before, in my past life I practiced law in San Francisco for 28 years! During that time, I represented some developers and their agents. Most of the biggest problems came from not disclosing -- or not fully disclosing. I always had the motto "when in doubt DISCLOSE". Well, some listened and some did not. When one client did not, they paid a huge settlement and got a lot of bad press! I am surprised by the number of agents who are happy to be part of a "coverup" for their client!

MAR

2007

Joan - I am amazed that any agent would be willing to take on that liability.

I have a new listing today of an apartment house. My advice to my client was spill your guts. He took the papers home to complete so he could be sure not to leave anything out. That is my kind of client.

Hi Randy, Great post! We fax out the disclosures on the property when a potential buyer likes the property, before a offer is submitted. I've never heard a negative word from any of my agents on them, it's a great part of our listing folders. Our brokers will not sign off on a listing without a property disclosure and there for the listing will not be active until one is signed by the seller.

As far as Ghosts? I can understand that with the Islands. I've heard stories over there that will curl your readers hair. That does make sense. When I lived there newly built hotels, condo's and homes were always blessed before being occupied to keep the ghost's at bay. A lot of those that didn't have a blessing performed eventually called in someone qualified to do so as soon as they realized why they need one.

Lysa - When we bought our home, there was a lot of bad blood because of some things the agent on the other side did. We had a blessing on the home before we moved in.

MAR

2007

Randy, that sounds like a good post! <or not> I'd never heard of a blessing performed due to bad blood before.

Lysa - It is a local tradition.

Randy,

RIGHT ON!!! It is always better to disclose than to not disclose. Let the buyer decide what is important to them. Better they decide before and not to go through with their purchase than to decide later when they find out and drag everyone to court. I like to use the Golden Rule, with a twist. Do unto others as you would have them do unto your mother (unless you don't like your mother).

Still no Casper stories out there?

Lucky :)

Lucky - I agree with being upfront.

One of our radio announcers decided to sell his home because it was haunted. He claimed it was real bad. I have yet to deal with such a situation.

Randy,

I would LOVE to experience a ghost someday. I guess I'm skeptical until I see things. Maybe I'm really from Missouri (the Show Me state) instead of Iowa.

Lucky :)

Lucky - I have never seen one and doubt most ghost stories I hear.

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