Disclosure

If knowledge is power, ignorance is usually expensive. The real estate/mortgage process is confusing to most people, not because it’s all that complicated, it’s just that there are so many details that the average person is just not familiar with.

One role of the expert in a transaction is to make sure that you get at least a quick education about areas in which you need to have information and learn how to process it correctly. Your real estate agent is one such expert and your loan officer is another. Today, I would like to talk about the real estate process, more specifically, the disclosure of facts about a property.

When you were searching for properties, you and your agent discussed property characteristics that were important to you. While you and your agent were looking at homes, you could certainly see most of the home’s qualities, both good and bad, before making an offer. Indeed, you were satisfied with them or else you would have not made the offer but moved on to another property.

The other kinds of qualities are those things that are not obvious to you or your agent. In my state, and most others I am sure, the seller is required to fill out a form detailing various facts about the property. The most important of these are the ones that you didn’t know about before making an offer.

Now if you believe that all sellers are totally forthcoming about defects that they know about, I want to go outside with you and have you show me your pumpkin truck.

Frankly, it takes an unusually honest person to disclose things to you if disclosure is going to blow the sale or cost the seller many thousands of dollars to correct.

Take the roof. It may well be that the roof leaks in a bad storm, maybe enough to have created stain marks on the ceiling, marks that would call attention to the problem. A super-honest person would replace the roof and show you the contractor’s invoice and his guarantee. But there are a lot of people who will get out the paint brush and paint the ceiling in the affected rooms and hope that you won’t notice.

Of course, your agent has arranged for an inspection by an independent home inspector. That person’s job is to look at all aspects of the home, assess their condition, and determine potential problems. In my view, this is critically important to you, so important that you and your agent should both accompany the inspector when he visits the property. Be sure to stay for the inspector to make his report.

There are also items in the public record that you should check. For example, if the property is a known hazardous material disposal site, you can determine that. You can also find out about the location of sex offenders under provisions knows widely as Megan’s Law.

There are other things that are not obvious. Here’s one from real life. Someone I know bought a home only to find out that the teen-ager next door was an aspiring drummer who practiced his drums every day. If the seller had filed a police report, there would be evidence that he knew about the problem and didn’t disclose it. But if he hadn’t, then he probably (I’m not a lawyer) did not have a legal responsibility to tell you about it. You would have had to visit the property at an hour when the kid was practicing to ascertain it.

You could also do something else I recommend; go talk to the neighbors. Drive out to the home on a Saturday morning and visit with your potential neighbors. One client of mine did that and found that a gang of car thieves had stolen many of the cars in the neighborhood. You might also be able to find out this kind of information at the local Police Department.

My point here is that you cannot rely on others to disclose all material facts about a property, especially if it is not in their best interest to do so. You need to take responsibility for these, do your homework. That way, if you find out that there is a serious problem, you can let it be someone else’s problem.

Be careful out there!