Disclosure in Real Estate Sales - What can be kept confidential?
What is Disclosure?
First of all, a disclosure is a part of the purchase and sale contract that gives the Seller the chance to tell you about any defects he may know about his property. Why would he ever want to do that? Well, because it’s the law. It’s illegal for the seller to hide defects from the buyer. Yet there are some things that the seller doesn’t have to tell you, some things that you may really want to know.
Do you have to tell if you have ghosts in the attic?
Well, I will start with the silly stuff, like is the house haunted? That’s a grey area in disclosure. The courts tend to rule that if the buyer thinks that something is detrimental then it is detrimental. Yet what if the rumor is that the house is haunted but the seller doesn’t believe it? Is he still required to tell you a story he doesn’t believe at all? It would be like me telling you that there was something wrong with the house because it was built while Mercury was in retrograde, if I don’t believe in astrology. There was a case in New York where a seller was sued for not revealing that the house was haunted, and lost. Part of the case hinged on the fact that the seller published a story in Reader’s Digest about the haunted house, so that proved that the seller believed it.
How about a grisly crime, do you have to tell?
But if you take it a little further, there is something a little more serious that the Seller is not required to tell you in Georgia. That is if the home “was the site of a homicide or other felony (including rape) or the site of a suicide.” The argument behind this rule is that these types of events do not affect the physical condition of the property. The effect is more psychological. But here is the twist: The Seller or the listing agent does not have to reveal the information, but if the seller or the agent knows about such information, and is asked, he (or she) is required to answer truthfully. This is an important point. They are not required to reveal the information but are required to answer truthfully if asked.
What if there was a diseased person living in the house?
What else does the seller not have to tell you? Well if the home was occupied by someone with a disease “which has been determined by medical evidence as being highly unlikely to be transmitted through the occupancy of a dwelling” which includes aids, the seller or agent is not required to tell you about that either. Here is another twist: They are not allowed to tell you if the house was occupied by someone with aids. It falls within the jurisdiction of fair housing law, since aids has been ruled to be a handicap. How do they answer? They should tell you that they are not allowed to answer that question.
How about criminal activity in the neighborhood?
It goes on…. What about sexual predators or paedophiles in the neighbourhood? The lawyers that write the Realtor’s contracts in Georgia have actually added a paragraph warning the buyers that if they have concerns they have to go to the website and do their own research. If the seller doesn’t have to tell you about felonies committed in their own house they definitely don’t have to tell you about felonies committed by their neighbours in other parts of the world.
What does this mean to you, the prospective buyer?
What does this mean to the buyer? Do your own research. Call the local precinct and get the crime records for the area. Go to the web and search the sexual predator database. Talk to the neighbors. Find out if there are ghosts, noisy neighbors or suspected drug dealers on the street. Don’t wait until after you close on the house to find out why you might not want it!
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Dan this is one of the best articles I have read in a while. Several years ago I was assisting an attorney with the purchase of a home and disclosed to her and her husband that a particular home was the site of a homicide and suicide. They did not purchase that home, for other reasons, but due to my honesty she has referred several other clients to me. I guess that “Honesty is the best policy”!
Interesting read, Dan. So many gray areas. I have only bought 2 homes in my life – both new construction. Personally I couldn’t bear the thought of someone dying or having been gravely ill in a home. But my new home could be built on an old Indian graveyard, so you never know! I wonder if builders have to research land history and disclose any sacred rituals or such that might have taken place? LOL.
Mack, Thanks for the props,I definitely agree in the honesty is the best policy slogan.
Lynn, I would think that the Indian burial ground is something that could really impact your house’s value. They might try to make you move it, if they every found out! One of those times when title insurance might be the savior!
That haunting case is especially interesting. Would have loved to been i the courtroom for that one.
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Interesting post! It sounds to me like buyers should err on the conservative side and disclose information if in doubt. However with the market the way it is and sellers desperate to move their property, I think we will see more people failing to disclose pertinent information.
Hi Dan,
Great article and it certainly reminds us of the old term “Caveat Emptor” or buyer beware which doesn’t need to play a roll in today’s real estate environment. In Colorado although Sellers are required to disclose any defects they have actual knowledge of Buyers typically rely more on the whole house inspection and the title work rather than what the Seller reveals.
Especially prevalant right now is bank owned (REO) properties with which the bank provides virtually no disclosure at all.
With all the technology available to people there will soon be a way to learn more about the history of a property… I hope!
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That haunting category is interesting, and reminds me of a message from my pastor recently. He was talking not as much about ghosts, but more about evil spirits dwelling in houses and, basically, remaining in the house, after the previous tenant left. Had the previous occupant a grizzly history, the question discussed was whether or not evil spirits remained and needed to be removed.
Interesting stuff to think about when house-hunting…
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Dan,
You indicate that in GA a home seller is not required by law to disclose that the house “was the site of a homicide or other felony (including rape) or the site of a suicide.”
Specifically for suicide, do you know if a landlord does not have to disclose to a potential tenant about the suicide either.
As I understand it, they don’t. I am not 100% sure on that but I think the same rules for sale apply to lease.
Dan – a question about Seller disclosure. Seller had basement partially finished in 2004, same year as she and husband separated. House was ’sold/quit claimed’ over to the wife by husband as part of settlement. In 2009, Seller sold house with Disclosure statement stating and signed by seller under section 4 e, f, g to which she marked ‘no’ ONLY to find that there were additions (finishing off part of the basement to item e) and that there were NO permits obtained for the work, which she marked ‘no’ to item f that there was no work done for which permits/approval were not obtained and to item g she also said ‘no’ to has any work been done to property that was not in compliance with building codes or zoing regs. NOW based on this disclosure we thought we had ‘value’ in the property because of this partially finished basement which complied with codes, had permits for it’s constructions etc. We only found out that none of that was true late last week when we went to swap out a lighting fixture and found no insulation between drywall and cement basement wall which led to us asking the City about any work permit for the project. They came back with NO PERMIT had been issued in 2004 for the work. The Seller now states that it was the responsibility of the Contractor to get the permit and to deal with them. I will not do that because if Seller now has problem with Contractor for not adhering to any original Contract which required that the Contractor get all permits and pay all fees as part of the estimate……….then it’s between Seller and Contractor – that is nothing to do with us. What is to do with us – is that the Seller’s Disclosure statements contained INACCURATE information about additions which will now have to investigated for code adherence, check electric, check plumbing etc so that it is all to 2010 codes and not 2004 codes. We based our purchase on ‘value’ in the basement and that all paperwork and permits had been obtained. Now, if we were to turn around this year and sell it – we now know that there was no permit pulled for the work and the value in the house is NO LONGER there as it was when we bought it. We have been ‘damaged’ by the Seller’s inaccurate Disclosure on her house. What are your thoughts as to what we can do???
Generally with these kinds of questions I would have to suggest showing the original paperwork to an attorney. This is a legal question and we are not able to give legal advice. I would think that there would be some recourse, but it would all depend on the exact wording of the disclosure, the wording of her explanation on the disclosure and the laws in your state.
Hi, Dan,
I wonder if you can answer this question for me? I purchased a home in January of 1999 which was later discovered to have defective lap siding. I was not aware of the class-action lawsuit until the deadline had passed. The class-action lawsuit was initiated in 1997, I believe, and was in full force by some time in 1998. Was the seller required to disclose that this siding was defective? He had to have received notices of the impending lawsuit. At that time there was no evidence to suggest that the siding was defective, but obviously in the ensuing years it has deteriorated. By the way, the seller, out of the blue, approached ME near the end of 1998 to suggest my buying the house, which I had been simply renting since July of 1996. Another bit of information is that the seller is the mortgage holder. I am a widowed mother of two young children and simply can not afford the repairs, and I am desperate to know if there is anything I can do!
Thanks if you can help!
Alison Holland
Alison,
I would have to suggest that you take this to a lawyer first and foremost. I will give you my opinion on this but it is by no means legal advice. I do not believe that people with the defective Louisiana Pacific siding were notified of the class action lawsuit. It was fairly heavily publicized but I never heard that they had any way to identify and give notice to homeowners who had the siding. I also would think that you would have to prove that the homeowner knew about this and withheld the information from you. I don’t know what the statute of limitations on that kind of lawsuit are, that is another question for a lawyer who has a practice in your state.
My guess would be that you will not have recourse, but perhaps since the mortgage holder is the seller really was unaware of the problem, they may have an interest in protecting the value of the collateral on their mortgage, and may be open to getting the repairs done and perhaps splitting the cost with you (by increasing your mortgage, rather than you paying your half).
Good luck!
Dan,
I am in the same predicament as Tiziani Zorzi above. I live in Georgia. I would love to know if you could get in contact with Tiziani above so that I may get some information as to what her situation is turning out to be. I fortunately bought title insurance that SHOULD protect and cover me however they are trying to deny the claim. My situation is I purchased a 5br 3 bath home 4200 sq ft. that was represented to me throughout the entire purchase by the sellers and my agent. After having a roof situation and the county coming to inspect the roof, I have found out this house is legally on the books as a 1600 sq ft 3br 2 bath home. The other 1800 sq ft is all additions non permitted and MUST be removed or permitted and redone. Now i am finding out through investigating my closing documents and title searching that the deed actually was transferred and sold to a relocation company 1hr prior to my signing of my closing documents. So legally I was purchasing the home from this relocation company and not the residents living in the home. However all documents pertaining to the sale of the home…Inspection reports, sellers disclosure etc… were signed by the residents living in the home NOT the relocation company of whom I legally on paper purchased home from. This entire deal was a lie and I was DOOPED. I am currently trying tpo find an attorney who is not affiliated with Ticor Title and is willing to sit down and get me some answers because no one is being of any help…. I want no other person to EVER have to go through what I am going through. $200,000.00 is alot of money for me to lose and someone dropped the ball on the transaction. So lastly, I know and understand you are not in any position to advise legally I was just wanting to know if you could forward this to the lady I mentioned and see if we can not get suggestions from each other. You would think that the Federal Government would be interested in some of this, because they are the ones who through Fair Housing Department created the Federal Act of Seller Disclosure Rule.
What a mess you are in! What county is forcing these issues? I have heard of the building inspectors cracking down on builders who built without permits, but not on new homeowners who had nothing to do with the construction. How long has the addition been there, do you know?
Oh yes, I have contacted Tiziana Zorzi and given her your email address.
As far as I can tell with all my research and asking the neighbor, it seems as it could have been here since 2002. The county I am in is Paulding County. The building official and the commissioners are all on my side, However; they said regardless it needs to be coded or ripped out. I dont blame them. It is clearly a violation but they are willing to work with me in whatever statements they need to give to the insurance companies. The problem is the Title Insurance company does not want to pay the claim! I have a valid claim I believe under the following covered risks:
#14 Because of an existing violation of a subdivision law or regulation affecting the Land:
a. You are unable to obtain building permit – (only permit i can obtain is to rectify/remove the existing 1800 sq ft addition – not repair work for roof leak damage)
b. You are required to remove or corret violation – (yes county is needing me to do)
c. Someone else has a legal right to, and does, refuse to perform a contract to purchase the Land, lease it or make a mortgage loan on it.
#15 You are forced to remove or remedy Your existing structures, or any part of them – other than bondary walls or fences – because any portion was built without obtaining a building permit from the proper governing office. The amount of your insurance for this Covered Risk is subject to Your Deductable Amount and our Maximum Dollar Limit of Liability shown in schedule A. (yes that is what I need to do and I feel I should collect on this, obviously if I am only legally showing 1600 sq ft on books but home is actually 4300 sq ft there was obviously addition without permit)
#26 Your title is unmarketable, which allows someone else to refuse to perform a contract to purchase the Land, lease it or make a mortgage loan on it. (BINGO! i can not sell this home the way it is, it needs to be brought to code and remedied..I could not give the house away if I wanted to, the county will not allow ownership to change as the house is in this condition)
So in a nut shell the Title Insurance company is backpeddaling and claiming there is a bunch of fine print and I have gone over the policy with a magnifying glass and all print IS readable.
It is a terrible mess I am in the problem is all the estimates rolling in now it looks as though this job is going to hit the $60,000.00 mark and I refuse to pay that kind of money for someone else’s gufaw. It is a shame and I certainly hope my case will bring attention to someone and they can use my situation as an example of Law change in this state and more Consumer Protection. I am from South Florida and this would not have even made it to the market in this condition Florida has tough Consumer protection especially when it comes to real property.
I just moved to GA and bought a house and I have been totally appalled at the poor construction, lax inspection process and dishonest disclosure standards. I don’t know what on earth I paid my inspector for, since the first 3 things I signed were all documents promising to not to hold him liable for anything. And then all he said on anything was “appears serviceable,” and wouldn’t answer any questions. Within my first 48 hours in the house, I had electrical, faucet and furnace issues. The sellers claimed that the furnace was five years old – I have since learned that it is 16 years old. They also said they had serviced the septic tank a few years ago, and I found out from neighbors that these folks actually had a total system failure and it flooded the back yard. I’ve also been told that the owners’ dogs were permitted to freely poop and pee in the house, and fight. So the walls were painted dark to cover the blood, and the carpet is all mismatched. I have no clue what they did to fix the septic field. None of this was disclosed, and they lied on the furnace age. I have spoken with coworkers who moved here and they say that in GA, the inspectors don’t consider themselves working FOR you and they are more concerned with moving sales along quickly so real estate agents can make their money, therefore giving the inspectors more business. In my office alone, two people were conned into buying houses with broken foundations. Others had problems more like mine – less severe but still expensive to fix. I’ve been told that GA’s entire real estate industry is dishonest. I am at wit’s end because I don’t have the money to fix everything that has turned out to be wront with my house. I am frustrated because I TRIED
… to ask all the right questions and I STILL got screwed and am now stuck with a money pit in a neighborhood with crime problems that were not on the county Web site. People new to GA need to be WARNED about the deceptive business practices down here! One of my coworkers is flying an inspector in from out of state to inspect her next house!
Well I hate to hear this. I think that in every industry there are those that are better than others. Your co-worker’s ideas about Georgia inspectors are not realistic. The inspectors are not all united on how they work and think, there are some excellent inspectors and there are some that aren’t so hot. Home inspection is not an industry that is highly regulated here, so there is a wide range of skill levels out there.
I think that the inspector’s job is to figure out the age of the systems and if he told you it was 5 years old and it turned out to be 16 years old, then you may have recourse against the inspector, even if it’s only limited to the price of the inspection, that can be significant.
Also one of the primary purposed of the disclosure is to give you some ammunition if you have to sue the seller for hiding defects. If they outright lied to you I think you should consult an attorney. Lying about septic issues and age of systems is illegal and you may be able to win in court. The disclosure is a document that you can use to prove they lied, and you may prevail.
For anyone buying a house, you can always go to the local police precinct and get the crime statistics for any neighborhood. There is no way anyone could know for sure what is going on. The seller or agent could easily not ever hear of break-ins or other kinds of crimes. When you look at the actual statistics, many of the most upscale, suburban, supposedly safe areas have a significant crime problem, while some areas that may seem like they would have more problems, actually have less issues.
I feel your pain I am from Florida and these practices would NEVER even be a thought in someones head to think of pulling …. the counties inspectors and courthouses on every real property transaction like white on rice. I have a problem with knowing that the Sellers Disclosure as i was told in Floorida from when I sold my house…. The sellers disclosure is a Federal Act..DO NOT LIE on it, even if you changed a receptacle cover put it on there!!! Lying on this is breaking a huge law and you DO NOT want to play with this paper it is the single most important form you will be filling out and signing. That is what my agent in Florida told me and they were very adament as to take my time and put EVERYTHING no matter how miniscule I may think it is. It apparently is not here in this stae; the Sellers Disclosure in Georgia is only a piece of paper that is only good to wipe your bum with when you are on toilet. I am sorry for you Shboom.
Dan feel free to give Shboom my email addy and I will be more than happy to let him know my plans and give him ideas on how to get him a case together.
The disclosure is a valid document here and if they lied on it you will have a case! It is not a worthless document in GA! You have to pursue it with a lawyer in court, but the disclosure has as much validity here as it does in Florida!
I hope this will hold up the problem is finding a lawyer who is not affiliated with the Tilte Insurance Company. Wish me luck and great job on the article. It was very helpful, especially the discussion following it, I am sad to see that this is not only my own unique situation, but comforted in knowing I am not the only one with this problem. Thank you Dan!
Thank you, I’m glad that I could help, Janet! Good luck with this and keep me posted as to how it works out.