Buyer Beware is dead?
In recent years the courts in Arizona have ruled that the seller has an obligation to disclose any material issue of fact known at the time of sale. Material issue of fact is generally considered anything that has to do with the value of the property, however there are a few exceptions for contagious disease, crimes, etc.Â
Recently a buddy was sued by a previous buyer of a property.Â
The buyer sued him under the assumption that a material defect to the sewer line of the house had not been disclosed. This was not the case as my friend had filled out, properly, a seller property disclosure statement (SPDS) and provided it to the seller, listing everything he knew regarding the property he was selling.Â
This is where Caveat Emptor comes into play.
While the seller has a legal and moral obligation to disclose any material fact to the buyer, the buyer still is required to perform an inspection of the property, provided the seller has made the property available for such an inspection. For this instance, lets assume the buyer was provided sufficient time to inspect the property (the standard time in the AAR contract is 10 days). It is incumbent upon the buyer to properly investigate the property for defects which the seller may not be aware of, failure to do so resolves the seller of responsibility.Â
The lesson learned which should be learned by all.
Everyday I see listings where the seller states "NO SPDS as the seller has not occupied the property" and "No Inspection Period". In these circumstances I truly believe (and I am not an attorney, however I did stay at a Holiday Inn Express) that this places additional risk to the seller, risk they wrongly believe they are avoiding. In speaking to a friend who is a real attorney (and has also stayed at Holiday Inn Express hotels so he is extra smart), he believes the statement itself is untrue, as not living in a property does not instantly insulate you from knowing anything about the property which may be material. This is especially true in the flipping market, where the home was remodeled, it is tough to argue that during the remodeling process, the seller do not become intimate with the property and condition thereof.Â
As someone who flips and consults on flips..
I ALWAYS recommend to my clients and ALWAYS take my own advice and DISCLOSE, DISCLOSE, DISCLOSE. If I know something I yell it from the roof tops. In many cases, in addition to the SPDS I will provide photos of the issues if I have them. While I am not an attorney and you should consult one before taking my advice to court or anyplace legal, I see no good in trying to rely on Caveat Emptor to save your bacon. Ultimately, I say Caveat Venditor (Let the Seller Beware)....