Uncovering a home’s defects

Castles in the Sand

The definition of “disclose” is to uncover or reveal. When it comes to uncovering problems in a property you’re interested in purchasing, the pathway is cluttered with rules that are frequently unclear. Nevertheless, about once a year I like to do a column about real estate disclosure, and late summer is a good time to review this in preparation for the upcoming selling season.

Last week I focused specifically on disclosing previous flooding incidents. This week I’ll touch on many of the other aspects of home disclosures.

In an effort to protect buyers, many states are holding sellers responsible to disclose defects before closing. Since 1985, Florida law has provided for that as well.  As we reviewed last week, the Florida Seller’s Disclosure form is not mandatory for sellers to fill out and sign, however, they are still required to disclose any material defects in the property that could affect the value of that property if they are aware of it, and this is where it gets foggy. If a seller states he/she has no previous knowledge of, for instance, sinkholes and after the closing a sinkhole develops, can the new owner hold the previous owner responsible? According to state law, after closing the onus is on the new owner to prove that the previous owner knew about the defect and willfully did not disclose it.

Some of the points covered on a seller’s disclosure are potential claims against the property or pending court cases, including in the case of condominiums; special assessments that have been approved; all of the HOA or condominium association rules and fees, boundary issues for single-family homes; the aforementioned sinkholes; and environmental hazards such as asbestos, lead paint, mold, Chinese drywall construction, and wood-destroying organisms. Disclosure also includes the condition of major systems, like plumbing, air conditioning and heat and electrical. Condition of appliances is also a disclosure item as is in-ground pools, hot tubs and, of course, roofs.

The approximately six-page form does not specifically ask about property tax, which is easily acquired from county property rolls, but sellers are generally asked what the annual property tax is, flood insurance if the property is in a flood zone and frequently utility bills. Buyers should not rely on any information about taxes and certainly not utilities. The amount of property taxes that the buyer may be obligated to pay in the year subsequent to purchase will undoubtedly change since a sale triggers reassessment of the property generally based on purchase price.

Finally, sellers will be relieved to know that if the property was the site of a homicide, suicide or death, it is not considered a material fact and does not need to be disclosed. Further, according to Florida law, if the property was inhabited by an individual with HIV/AIDS, it is not required to disclose this fact. Also, if the seller shares with you or the real estate broker that they believe the house is haunted, there is no legal disclosure ruling one way or the other; essentially the law is silent on this.

Pretty much you can assume that any tangible defect related to a property needs to be disclosed, whether it is in writing or verbally. However, I would encourage all sellers to fill out the written disclosure statement providing the buyers with a feeling of transparency and avoiding any misunderstandings about the condition of the property. Nice when things are uncluttered.