The Importance of Full Disclosure
Friday, February 20, 2015
By Sarita Cabrera
Misrepresentation regarding the condition of a property is one of the most frequently made claims against sellers, REALTORS®, and brokerages according to Lana Schroeder, Esq., claims specialist for Rice Insurance Services Company, LLC, in her article “Ten Most Frequently Made Claims Against Real Estate Agents” for RE INSIDER.
Unfortunately when something goes wrong, customers point the blame at the most convenient source — the agent and the brokerage — because they are perceived to have deeper pockets than the seller. In order to avoid the potential of a complaint or lawsuit regarding nondisclosure, here are a few tips to follow:
- Make sure that the seller(s) personally fill out the Sellers Property Disclosure Statement, including all repairs and insurance claims even if the problems have been repaired and no longer exist.
- Guide the sellers to also include what steps they took to remedy any repairs or remediation, as well as the names of the licensed contractors that performed the repairs.
- Have sellers include any known plans for future roadways, commercial buildings, or zoning changes that may affect the property's value.
- Encourage sellers to transfer the disclosures provided by the prior owner of the property.
- Lastly, make sure the sellers update the disclosure statement during the term of the listing to include any new repairs made or inspection findings from failed contracts.
When you receive the disclosure from your sellers, take the time to review it and ask questions if something doesn't seem clear. If the sellers knowingly conceal a defect, all parties will be vulnerable to a serious claim by the buyers after closing. Encourage your seller to offer a home warranty, as having it in place may cover repairs of some unforeseen items and will also keep the buyers happy.
Although a seller isn't required by law to fill out a Sellers Property Disclosure Statement, pursuant to the Florida Supreme Court case Johnson vs. Davis, a seller is required to disclose known facts that materially affect the value of the property that are not known and readily observable to the buyer, whether they occupied it or not.
Sarita Cabrera, Better Choice Realty Inc, is a member of the ORRA Professional Development Forum. She can be reached at firstname.lastname@example.org.
ORRA frequently schedules classes, workshops, and online offerings related to risk management. Check the ORRA Calendar often, as new classes are continually being added to the education lineup.