Honesty is the best policy – especially in real estate

Castles in the Sand

Good old Benjamin Franklin had it right well over 200 years ago – when you’re dealing with people the best course of action is to be honest. And when you’re selling real estate, it’s more than a good idea, it’s legally imperative.

Traditionally, let the buyer beware was the principle most real estate transactions lived by. It was the buyer who was responsible to inspect the home and discover whether there were any unacceptable conditions or defects before closing. That’s why home inspectors became so important when purchasing a property.

However, in an ever-increasing number of states, courts and lawmakers have held that sellers are in the best position to know all material facts relating to their properties, particularly those that are not visible to the naked eye, and should disclose these to the buyer or face legal liability.

Florida is one of those states that is holding sellers responsible to disclose defects before closing. Since 1985, Florida law has provided that, with some exceptions, the seller must disclose any facts or conditions about the property that may have a substantial impact on the value or desirability of the property that may not be visibly obvious.

To assist sellers in making all relevant disclosures, the Florida Association of Realtors provides a standard form which covers many common property characteristics about which buyers want to know. Although sellers are not required to complete and sign this form, they are still required to disclose all relevant information to buyers, even when they may not be obvious. This can be done either in writing or orally, but to protect their statements sellers should have a written document as proof.

Some of the items contained on the seller’s disclosure form are potential claims, or court proceedings; nature of condominium or HOA association rules; boundary issues; status of any sinkholes; any environmental hazards such as asbestos, lead paint, mold, Chinese drywall; damage from wood destroying organisms; flooding or ground leaks; disclosure of condition of major systems such as central air and heat, plumbing and electrical systems and brands and condition of appliances.

This may be intimidating to homeowners who may be worried about problems they’re not aware of. The law states that you will not be expected to know or learn about or disclose property defects which you have no actual knowledge of. If in the future the buyer of your property discovers a problem after closing, the onus is on him/her to prove that you knew about the defect and did not disclose it. They also would have to justify that the defect has had a substantial impact on the value of the property and that the defect would not have been easy for the buyer to detect. Essentially Florida homeowners are required to disclose only those property defects of which they have actual knowledge.

There are a few facts that do not need to be disclosed to buyers. One is that the property has been inhabited by a person infected with HIV or AIDS or that a murder or suicide has occurred or is suspected to have occurred on the property.

And even if you’re selling your property in an as-is condition, that does not dismiss you from the requirement of full disclosure. You will have to disclose any material defects that you are aware of.

I would encourage sellers to prepare a written disclosure statement to protect them and instill confidence in buyers. Honesty and transparency is the proper way to sell a property, even in those few cases when it may not be required. “Honesty is the best policy” are words to live by.

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