Those of you who have sold a home in the last eight years may be aware of the requirement for providing a potential purchaser with a Seller’s Property Disclosure Statement prior to the signing of an Agreement of Sale. Nearly all residential real estate sales require this statement to be provided to the buyer, and, yes, this does include “for sale by owner.”
The exceptions to this general rule are: (and this is where my estates clients get a little free advice) transfers by a fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship or trust, and certain transfers of new residential construction that has not been previously occupied. For example, if an executor of an estate intends to sell the decedent’s home to a third party, he is not required to provide a disclosure statement to the buyer. Why? The law, known as the Real Estate Seller Disclosure Law, states that a seller must disclose to the buyer any material defects with the property known to the seller by completing a property disclosure statement which satisfies the requirements of the law. An executor of an estate is exempt from this requirement because he would, in all likelihood, have no actual knowledge of any defects in the property. Then again, if the executor is made aware of any material defects, he must disclose them to the buyer.
The Real Estate Seller Disclosure Law sets forth the subjects which must be addressed in the statement:
- Seller’s expertise in contracting, engineering, architecture or other areas related to the construction and conditions of the property and its improvements.
- When the property was last occupied by the seller.
- Roof.
- Basements and crawl spaces.
- Termites/wood destroying insects, dry rot and pests.
- Structural problems.
- Additions, remodeling and structural changes to the property.
- Water and sewage systems or service.
- Plumbing system.
- Heating and air conditioning.
- Electrical system.
- Other equipment and appliances included in the sale.
- Soils, drainage and boundaries.
- Presence of hazardous substances.
- Condominiums and other homeowners associations.
- Legal issues that affect title or would interfere with use and enjoyment of the property.
The Pennsylvania State Real Estate Commission has developed a form which provides minimally-required language to comply with the law. Another form which also satisfies the law is made available through the Pennsylvania Association of REALTORS® (PAR). The PAR form is more comprehensive, exceeding that which is legally required.
So, what must a seller disclose about his property? A seller must disclose to a buyer all known material defects about the property being sold that are not readily observable. Furthermore, if the seller later learns of a material defect in the condition of the property after the date the statement is signed by him, he is required to update the statement. The seller must also disclose any material defects that are not specifically addressed on the form. However, because the seller is not obligated to make any specific investigation or inquiry in an effort to complete the property disclosure statement and because the statement generally reflects the actual knowledge of the seller, it is not a warranty that no defects exist. The buyer would be wise to conduct his own inspections despite a “clean” statement.
The next question is what constitutes a “material defect”? A material defect for these purposes is “a problem with the property or any portion of it that would have a significant adverse impact on the value of the residential real property or that involves an unreasonable risk to people on the land.” I once dealt with a real estate agent who attempted to claim that spots on an old carpet were material defects. Obviously she didn’t prevail.
Not long ago, I came across a disclosure that in response to the question: “Have there been any pets living in the house or other structures during your ownership?” the seller replied, “Yes, one dog over 30 years ago.” You might think this was a little ridiculous to care if the seller owned one dog over three decades earlier, but he answered the question properly. The point is that for many questions there are no time limits put on the disclosure requirement. Also, you may wonder, why care about pets in the first place? Aside from issues such as stains on floors or the presence of doggie doors, the buyer could also have severe allergies to pets, and the residue may still be found in carpets and draperies long after the pets are gone (but I doubt 30 years later…)
If you have any questions concerning how to properly answer, update or deliver a Seller’s Property Disclosure Statement, please contact our office.
— Denise Ciampitti