Dishonest Disclosures

A homeowner is expected to know things about their house that buyers wouldn’t ordinarily know.

Like the time an investor bought a vacant house with the carpet missing in the upstairs closet. Why was it missing? It was not disclosed. After closing escrow, the neighbors came over and asked if he knew about the guy who hung himself in the upstairs closet. Sadly, the answer was a resounding “NO!”.

Or how about the time the seller said the newly installed Solar Panels could be removed and agreed to discard them only to find out the panels had to stay with the home? After much argumentation and debate, the buyer backed out of escrow because he didn’t want the Solar Panels.

Sometimes a seller should know better. They need to be sure they are disclosing properly.

Risk Management (aka making sure you or your clients don’t get sued) is a necessary part of our career. It is something we take very seriously by investing our time and energy in making sure we are up to date on the latest requirements. I have personally attended many hours of training on the subject matter and two particular phrases have stayed with me all these years.

  1.  When in doubt, disclose. If you, the homeowner, think that what you know may hinder the buyer from buying your home, you should disclose it. Maybe it’s a neighbor that is constantly throwing late parties and you’ve called the police to intervene. Or perhaps it’s a pending HOA fee increase that was communicated to you only a week ago. The simple rule of thumb is this…If you were buying your home again and the seller didn’t tell you about _________ (fill in the blank), would you be upset? If you think you’d like to know, then it’s worth the risk of a cancelled escrow in order to protect yourself.
  2. Buyers don’t sue because of what they know, they sue because they are surprised. This is so true. Again, if a buyer moves into a house and is surprised by what they find, they may sue the seller. If the seller has disclosed this “surprise” somewhere in writing while in escrow, the buyer probably doesn’t have a legal claim.

Does the Buyer’s Home Inspection Cover You? We recently encountered another situation where a buyer was upset due to a water leak they had in the recent rains. The home closed escrow almost two years ago and within those years we didn’t have a lot a rain. However, when heavier rains passed through, the buyer called us, angry at the seller, claiming that the seller should have disclosed the leakage. We sent our roofer to take a look at the leak, pulled out the file to see what the seller had disclosed, and also verified the home inspection records. The home inspection indicated an area of the roof needed repairs. The record showed the buyer signed off on the report and escrow closed. In this case, the buyer had to pay the roof repair bill.

But does a buyer’s home inspection automatically protect you? No. A buyer’s home inspection does not protect you against disclosure items that cannot be discovered in the home inspection process—such as neighborhood problems, recurring repairs, and other similar concerns that a seller would know but a buyer or inspector would not.

So when it comes to disclosures, remember that when in doubt, disclose.

::: About Aaron Zapata :::

Aaron Zapata is a top-producing REALTOR® in Southern California and owner of IMPACT Properties (formerly Zapata Realty, Inc.). He holds an MBA from Cal State Fullerton and his team closes over $40 Million per year in real estate transactions. If you’d like to contact Aaron about selling or buying a home or improving your real estate career, you can email him at Aaron@AaronZapata.com or call (714) 660-2122. He’d love to hear from you.

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