by Dan Krell © 2005
It is not unreasonable for homebuyers to seek assurances about the homes they purchase. One method for obtaining a sense of confidence about the home is having a home inspection. Sometimes it is not as much as wanting to know what needs to be fixed as much as wanting to know what they were getting into, as one of my clients casually stated. However, home inspectors are not perfect and there are numerous conditions in the home that could go undetected.
In the past, it used to be buyer beware. As you could imagine there were many complaints and lawsuits that were filed with state officials which prompted them to enact a property disclosure law. Property disclosure laws have been enacted in about thirty states. Here in Maryland, the disclosure just changed this last Saturday (October 1). The previous law was around since 1994.
Before Saturday, homesellers, had the choice of either disclosing facts about their home or they could offer a disclaimer that the home was being purchase “as-is.” Among some of the items that would be included in the homeseller’s disclosure include, but is not limited to, plumbing, heating, electrical, and home structure. If there was any knowledge about any past or potential problems, the homeseller would disclose that information.
If the homeseller chose to not disclose any information, the seller chose to offer the homebuyer a disclaimer. The disclaimer stated that the homeseller did not warrant the condition of the property and the home was being purchased “as-is.”
It had been incorrectly thought by homesellers and some Realtors alike, that if the homeseller provided a disclaimer, the homeowner did not have to provide any information at all about the home-including relevant material facts about the condition of the home. In fact, some homesellers would offer a disclosure statement and still withhold some important material fact about the home which was not apparent.
Many law suits have been filed by homebuyers who, after years of living in a home, have discovered latent defects. The lawsuits typically claim the home seller and the listing agent knew about these defects. Latent defects, as presently defined by section 10-702 of the Real Property Article of the Annotated Code of Maryland, are 1) defects which could not be reasonably expected to ascertain or observe by a careful visual inspection of the real property and 2) would pose a direct threat to the health and safety of the purchaser or an occupant of the real property.
Like the previous law, the new disclosure law requires the homeowner to provide either the disclosure statement or disclaimer, except with a little twist. Since October 1, if the homeseller chooses to provide a disclaimer (sold “as-is”), the homeowner must still provide a statement that lists all latent defects in the home.
If you are selling your home or thinking of selling your home in the future, you should discuss the disclosure/disclaimer statement and the new law with your Realtor. If you have any doubt about your obligations as a homeseller or do not understand the disclosure law, you should consider consulting with your attorney.
I was taught the golden rule of disclosure to be: disclose, disclose, disclose. A problem that is disclosed to a homebuyer before they enter into a contract with you is a piece of information that the homebuyer will keep in mind as they purchase the home. However, a problem that is not disclosed remains a problem and has potential to become a law suit.
This column is not intended to provide nor should it be relied upon for legal and financial advice.
This column was originally published in the Montgomery County Sentinel 10/3/2005.
Copyright Dan Krell 2005.