The disclosure of a home’s material defects didn’t begin with passage of the Real Estate Seller Disclosure Law (“RESDL”). Pennsylvania common law has long required that sellers disclose latent and material defects. The problem, prior to the use of the mandatory form required the RESDL was that sellers often overlooked problems. In the old days we elicited material defects by asking the seller, on the listing agreement, if he/she was aware of any material defects. The seller was given two lines to explain. We know that disclosure is more meaningful when the sellers are required to systematically review pages of questions and provide answers.
No system is perfect and despite having to complete a fairly comprehensive disclosure form, defects frequently go unreported. Unreported defects are more likely to lead to lawsuits, including suits that include real estate agents and brokers. It is therefore important to you that your sellers do a thorough job in reviewing and revealing anything that might be considered a material defect.
“Disclosure, disclose, disclose” is the frequently uttered mantra of listing agents. I think we can do better. Here is a checklist of issues that a listing agent might review with their seller in order to elicit problems that otherwise might go undisclosed.
Recurrent repairs. Has the seller had to make repairs to a single issue on multiple occasions? Maybe that leaky transom above the front door is in great condition now, but how many times over the past 10-15 years has it leaked? If a buyer experiences a leak at this location post-settlement and learns that this undisclosed problem occurred before, it will be viewed as very suspect. Ask your sellers if they have had to make repairs to a particular item or system on more than one occasion and encourage disclosure where appropriate.
Insect infestation. Has the seller ever hired a pest control company? If the answer is yes then something should be included in the seller disclosure, no matter how long ago the treatment was made. “Having called XYZ pest company 12 years ago for ants” is not likely to prevent a sale. If the buyer only finds out about the past treatment after the buyer has discovered infestation, expect a suit.
Maintenance deferral. I have had several cases involving sellers who are systematically upgrading their home. Perhaps they are replacing older siding and they’ve made repairs/replacement to part of but not the entire home. Sellers sometimes view their anticipated future repairs as “maintenance” rather than seeing the underlying problem as a material defect. What will the buyers think when they meet a contractor who says “Yeah, I told the sellers that they had to replace/repair that”? Ask your sellers to identify what areas they have been working on or would have worked on but for a sale, and err on the side of disclosure.
Ask the Handyperson. Do your sellers have a go-to handyperson who attends to their various problems over the years? If so, ask what the handyperson would say if questioned. It’s surprising how often a repair person becomes a witness.
Has it been suggested that your seller have a mold evaluation? Most homeowners have had an HVAC system or hot water heater repaired or replaced. Repairs at these locations also reveal mold issues. When subsequently contacted by the unhappy buyer, will that repair person remember having discussed mold with the seller at the time of the repair? Revealing that a minor mold problem was found and attended to is far better than saying nothing.
Basement, roof, crawl spaces and leaks. Every listing agent should grill their sellers on the importance of revealing even the most insignificant trickle of water found in any of these areas. If not revealed and if later a problem is detected, what is said in the seller’s disclosure will be most critical. “We had water one time in the basement” can prevent the nightmare lawsuit after the buyer discovers water. The disclosure has to be comprehensive and true and it deserves a discussion with the seller as to the nature and extent of any prior water experiences.
There are likely to be many recurring disclosure problems that you’ve experienced and I am sure you could come up with other important disclosure tips. By all means, incorporate your experiences into your practices.
As Realtors®, you realize that the suggestion of a cover-up or prevarication on a disclosure increases the likelihood of suit, the likelihood of an award, the likelihood of the imposition of punitive damages and attorneys’ fees. To you, equally important is the increased likelihood that you become a defendant in a suit. The form goes a long way in encouraging the type of disclosure that is required. It is not in itself enough. Discuss the importance of reviewing the form carefully and the need to reveal anything that might be considered an affirmative answer. Further, when “yes” is entered in any field on the disclosure form, have the seller answer the “yes” question in great detail on the lines provided at the end each of the sections of the disclosure form.
You have a role in assuring that sellers take seriously the careful completion of a disclosure form. When sellers don’t understand the gravity of the form or the scrutiny that will later be case upon it, they are going to look to you. Listing agents, protect your sellers.
Copyright © James L. Goldsmith, Esquire, 2019
All Rights Reserved
Mr. Goldsmith is an attorney with Mette, Evans & Woodside and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends Realtors® in disciplinary hearings conducted by the Real Estate Commission. For 27 years Jim was one of the voices on the PAR Legal Hotline.