WHAT IS SELLER DISCLOSURE?
Disclosure – sounds exciting, right? Maybe not, but it’s critical. Why? Because disclosure can be like a “ticking time bomb” in the world of real estate. That’s because we’re referring specifically to “seller disclosure,” or a seller sharing any problems or issues they’re aware of when they sell a home to a buyer.
Disclosure can potentially lead to a lot of trouble. That’s because many sellers are tempted to “gloss over,” minimize, or lie about these issues in order to keep buyers interested in the property.
Arizona law requires the seller to disclose material facts about a property, even if the buyer has not asked the seller or agent. As a seller, it’s your obligation and responsibility to disclose any problems of note. Buyers have the responsibility of investigating and inspecting the property for problems known and unknown, but the seller has the obligation not to withhold material information.
So, what needs to be disclosed? So glad you asked. Today we’re going to talk about what sellers need to disclose, what sellers don’t need to disclose, and how this information is disclosed.
WHAT A SELLER DOES NOT NEED TO DISCLOSE
There are some common myths about what needs to be disclosed to buyers. For example, you may have heard that the following details need to be shared with buyers, but in the state of Arizona, the seller does not need to disclose:
● that the property is or has been the site of a natural death, suicide, homicide, or most other crimes classified as felonies
● that the property is occupied by a person exposed to HIV or having a diagnosis of AIDS or any other disease not known to be transmitted through common occupancy of real estate
● that the property is located in the vicinity of a sex offender
Realtors aren’t obligated to disclose any of those details, either.
Although you’re not required to disclose these facts, the law states explicitly that it does not protect a seller who makes an intentional misrepresentation, even when it comes to facts that aren’t legally required to be disclosed.
For example, if you’re asked whether there has been a death on the property, and you know that there was such a death, you should not answer “no” or “I don’t know.” Instead, you should answer truthfully or respond that you are not legally required to answer the question.
WHAT DO SELLERS NEED TO DISCLOSE?
First, let’s talk about the Seller’s Property Disclosure Statement, often referred to as the SPDS (pronounced “SPUDS”). The Arizona Association of Realtors creates it as a guide for sellers to use, and it’s a roadmap for disclosure.
The SPDS prompts sellers to think about specific issues within the home that might need to be disclosed. It creates the opportunity for the seller to say, “Oh, I didn’t even think about that. We did have that leak.”
When reviewing the SPDS, the point isn’t to tell a story, but to share what happened and move on to the next item. For example, if your home had a roof leak, you can state, “Roof had a leak in August 2016, and it was repaired.”
How should agents advise their sellers to complete the SPDS? It’s best to take a better-safe-than-sorry approach. For example, if a seller says, “I saw one scorpion, but it was eight years ago, should I disclose that?” It’s probably better to disclose that information and allow the buyer to decide if they want an inspection or pest control treatment. What if the buyer has an allergy to scorpions, and they find out you knew there was a scorpion on the property? It’s important to note this on the SPDS.
Ultimately, agents should advise sellers to disclose when in doubt, or check with their brokers. A statement like “Yes, I had scorpions, just once about eight years ago. I haven’t seen any since” is perfect – you’ve disclosed it.
Other items of note might include flooding at certain times of the year, noise from nearby schools, football games, fireworks, traffic, and entertainment venues. These are all things that should be disclosed.
This is less about what is important to you as a seller and more about what could potentially be important to somebody else as the buyer. Again, it’s probably better to err on the side of sharing too much than too little.
HOW DO AGENTS ADVISE CLIENTS WITH REGARDS TO PURCHASING A PROPERTY?
Agents have all gotten SPDS where everything is checked as “no.” Obviously, as a buyer’s agent, you’re now relying on your own due diligence and inspection to find problems with the house. Ask questions of the seller and seller’s agent.
Ask the buyer to circle the neighborhood at different times of day to listen out for traffic and other noises. If you can, catch a neighbor and ask them, “how’s the neighborhood?” “How long has the house been empty?” There are limits to the questions that Realtors can ask neighbors, but a buyer has every right to talk to anyone and ask anything they like.
An agent could communicate with the inspector something like, “I have no information on this house. Please let us know if you see any particular areas for concern.” This is helpful, for example, if a contractor needs to further check the roof for damages before closing, or if other problems need to be further investigated. This is especially common if a home has been a flip or bank-owned property.
If you get a SPDS document that has been completed thoroughly, give that to the inspectors and have them verify the information provided. Ask them to tell you if they feel like something is wrong. Inspectors are looking for general things and may not be clued in to the items that matter to your buyer.
WHAT HAPPENS IF A SELLER DOESN’T DISCLOSE EITHER BY ACCIDENT OR INTENTIONALLY?
If a seller intentionally misrepresents the condition of a home or lies on the SPDS, the situation can become a civil liability. Intentional omissions are considered fraud. If you think this is the case in the purchase of your home, contact your agent immediately and explain the situation. Sometimes, the seller has genuinely forgotten about a problem and will arrange for repair. In the case of true liability, your agent will help you evaluate a further course of action.
UPDATES TO SPDS
Imagine you’re a seller and you go under contract. Your buyer has a home inspection done, and they discover that a pool was filled in or that there was un-permitted addition to the home that you were previously unaware of.
If the deal falls through, you can’t “un-know” this information. You will need to update the SPDS and disclose this information to a future buyer.
HONESTY IS THE BEST POLICY
When in doubt, be sure to share any issues that may concern a buyer on the SPDS and talk with your agent. If you have questions, contact a Desert Dimensions agent today at 480-270-5355.