Property Disclosure Statement in Real Estate Transactions
In a real estate transaction, the seller must provide a Property Disclosure Statement to the buyer. Normally, the Property Disclosure Statement is a standard questionnaire prepared by the listing agent according to answers from the seller regarding the history, current situation, damage, or problems that may have occurred on this property. The seller must truthfully disclose all information concerning the real estate: for instance, whether this property has termite damage; whether this property had fire damage; whether the house has environmental problems; or whether there is unlicensed construction on the property.
Because many sellers don’t understand the importance of the Property Disclosure Statement, and to promote the property for a good price, they prefer to conceal problems from the Property Disclosure Statement. They don’t realize their action will result in future problems. I’ll explain how important the Property Disclosure Statement is with a true story:
Client A sold the property for $200,000 to Client B. In the Property Disclosure Statement, he concealed the fact that the house was rebuilt two years ago after it was seriously damaged in a fire. B got that information from a neighbor six months after he moved into the house. When B bought the house, he had read the Property Disclosure Statement carefully and didn’t find this information disclosed. Thus, B thought A had intentionally concealed the fact that the house was burned, and he demanded compensation from A. A thought he had already sold the house six months ago, and even though he didn’t disclose that the property was burned and rebuilt, he thought B couldn’t do anything any more because it was a “done deal.” He thus refused to compensate B.
B then filed a lawsuit against A to rescind the transaction, and claimed compensation for related expenses. The court ruled in B’s favor.. A not only had to return the $200,000 to B, but he also had to compensate B for other closing and lawsuit-related expenses. In the end, A didn’t sell the house but ended up paying more than $10,000 in expenses and costs incurred by B. Needless to say, A deeply regretted his mistake of not disclosing the facts truthfully.
So the seller is responsible for disclosing all pertinent information in the Property Disclosure Statement. But the buyer bears some responsibility as well. To protect his interests when purchasing a property, he should request the Property Disclosure Statement from the seller or seller’s agent and read it carefully. If the buyer doesn’t understand the problems listed on the Property Disclosure Statement because of his own carelessness, he will have to bear the maintenance or repair fees in the future for any damage caused by problems already listed in the Disclosure Statement.
This article is only for your reference. Please do not apply mechanically to any exact cases. You are welcome to consult our attorneys at Liu & Associates, P.C. For contact information, please click here.
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