How To Look At A House
McGarry and Madsen's home inspection blog for buyers of
site-built, mobile/manfuactured and modular homes
Should I trust the Seller's Property Disclosure Statement?
Thursday, July 19, 2018
Under Florida law, as in many other states, a seller of a residential property has an obligation to disclose to the buyer all known facts that materially affect the value of the property being sold and are not readily observable. The Florida Association of Realtors has a standard property disclosure form that is provided to sellers as a convenient way to comply with the legal obligation of disclosure, and realtors encourage their sellers to use them. Completing the form is actually not a requirement, but deciding to not fill out and sign the form does not get a seller out of their obligation to disclose. Plus, it makes a buyer very suspicious of the property.
“The number one reason for a lawsuit after a real estate transaction in Florida is lack of disclosure,” according to Gainesville realtor Chris Handy, of Bosshardt Realty, and selling the house with an “As Is” contract does not eliminate the disclosure requirement. But decisions by Florida courts have made it clear that the seller is not responsible for something they “should have known”; only for known defects and hazards that were not easily discernible and not disclosed.
A recent case in the Tampa area, in which the seller received a settlement from their insurance company for repair of a sinkhole below their house (shown in the photo above), then made only cosmetic repairs to the home and sold it without telling the buyers about the sinkhole, has resulted in a criminal conviction in Federal Court for wire fraud. While the case highlights the possible legal consequences, it was an unusual situation because the lack of disclosure was so significant and easily proved. Most lawsuits are in civil court, and not that straightforward.
Disclosure is often complicated by the fact that many sellers do not have first-hand knowledge about defects in a home because they have never occupied it. Banks selling a foreclosure, investors disposing of a rental property, and the children of deceased parents selling their retirement condo to settle the estate are three examples. Also, sometimes people just forget about problems that occurred years ago and are unaware of current defects in their home. For all of these reasons, realtors encourage buyers to get a home inspection.
Any professional home inspector will tell you that they are not going to find everything that is wrong with a house in a two to three-hour examination. But a home inspection provides the homebuyer with a good understanding of the overall condition of a house, and adds an additional layer of “disclosure” that is a sensible part of due diligence in buying a home.
As an example, we inspected a home recently in a neighborhood known to have a high incidence of foundation problems due underlaying veins of clay soil. The buyer informed us that the seller’s disclosure stated that previous structural settlement/heaving had been repaired, but wanted a careful examination of the house anyway. An itemization of the work, including a diagram with the location of piers and total cost of the project was attached to the disclosure.
We always do a permit search in the public-access database of the local building department before each home inspection, and found it odd that there was no building permit for the extensive foundation work outlined in the documentation. Also, although there was plenty of cosmetic repair, clear evidence of further structural distress was still visible.
Because of the concerns we raised, the buyer called the foundation repair company after our inspection to figure out what was going on. They advised him that the paperwork he had was only a proposal, and they had never done any work at the home.
Also, see our blog posts What can I learn from talking with the seller? and What are the problems with buying a house sight unseen? and Do I have to bring my house up to code to sell it? and The seller gave me a report from a previous home inspection. Should I use it or get my own inspector? and How can homebuyers protect themselves against buying a house over a sinkhole?
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To learn more strategies for getting the best possible home inspection, here’s a few of our other blog posts:
• Can I do my own home inspection?
To read about issues related to homes of particular type or one built in a specific decade, visit one of these blog posts:
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