Step 1: Don’t Get Spooked by the Law
Beware --- Real estate listings don't reveal all. Oregon doesn't require real estate brokers to say that someone was violently murdered inside a house or even investigate if meth was cooked there.
• Deemed "not material facts" to a residential transaction include:
o Registered sex offender lives nearby,
o the land or a neighboring parcel was the site of a suicide or crime,
o that an adjacent property has been determined to be not fit for use due to health
issues such as contamination
o prostitution, gambling and unauthorized delivery, manufacture or possession of a
controlled substance.
o If a seller doesn't disclose it and a broker doesn't see it, you could end up with a
home with a stained reputation. And maybe a ghost.
o If you believe your house is haunted, you probably should talk it over with your real estate broker, especially if you believe a new owner would be in danger. If you believe your home is haunted but the ghosts are friendly, and you really don’t want the hassle of buyers being afraid to make a purchase, you should first check to see what laws are on the books, because every state is different.
o More than 20 states, such as Pennsylvania and New Jersey, have laws that say agents and sellers won’t be held liable for failing to mention that 20 years earlier a wife stabbed her husband in the home's master bedroom..
o you may be able to say and do absolutely nothing.
The latter may sound rather creepy or unethical on the surface, but if someone once died in your bedroom of a heart attack or shot 15 years ago, does that really have any bearing on the structural integrity of your house? Is that history going to affect the quality of your sump pump? Or another way to look at it: Nobody ever complains that nurses aren’t telling patients, upon being admitted to a hospital room, “By the way, your bed might be haunted. We’ve had 12 deaths in your bed over the last five years.”
If you fail or refuse to provide a property disclosure statement, a buyer has the right to revoke the offer any time prior to closing. To make sure that a buyer does not pull out after you have put time, energy, and money towards closing the sale – and to avoid later lawsuits over undisclosed defects – it is important to provide a full and complete disclosure statement. The property disclosure statement requires you to answer specific questions regarding the condition of your property, relating to:
• title to the property and existing encumbrances, such as easements and liens
• domestic water sources and irrigation
• sewage disposal
• insulation, including whether there is insulation in the ceiling, walls, and floor
• dwelling structure, including whether the roof leaks and whether any unpermitted additions exist
• dwelling systems and fixtures, such as the electrical and plumbing components of the house
• common interests, like homeowners' association dues and shared common areas.
For most questions, you will be required to answer “Yes”, “No,” or “Unknown”. Each answer must be based on your actual knowledge.
Let’s say the question is: Is the outdoor sprinkler system operable? If the sprinkler system is operable without any leak or other problems, the correct answer is more than likely “Yes.” Alternatively, if you have never used the sprinkler system, or have not used it in several years, the proper answer is likely “Unknown.” If you are uncertain, answering “Unknown” is the best answer. Such answer should alert the buyer, if he or she is concerned, to inquire further regarding that issue.
Consider each answer carefully. If you are unsure how to answer, ask your real estate broker or attorney.
o What Is a Material Defect?
The last question in the disclosure statement acts as a “catchall” to make sure all issues that may influence a buyer’s decision to purchase the property are fully disclosed. Specifically, it asks “Are there any other material defects affecting this property or its value that a prospective buyer should know about?” You must answer “Yes” or “No”. “Unknown” is not an option. If you answer “Yes,” you will need to provide a written explanation. A material defect is a condition that may have a significant (negative) impact on the value of the property. For instance, toxic mold growing in the crawl space below your kitchen may significantly impact the value of your property. Likewise, a venomous spider infestation may significantly impact the value of your property. Oftentimes it is unclear whether a condition is material. Don’t be afraid to ask your real estate agent or attorney.
For Obvious Defects, Simply Not Knowing May Not Be Good Enough
Although answers to the questions in the disclosure statement need only to be based on your “actual knowledge,” a buyer may not believe that you didn't know about a particularly obvious defect. If toxic mold is growing under the kitchen sink, smells odd, and is visibly obvious, but you fail to disclose it, a buyer may infer that you knew of the mold, and therefore sue you upon discovering it after the sale.
To avoid such a dispute with a disgruntled buyer, it is worth examining your closets, drawers, and other easily accessible areas of the house for obvious defects. This may be especially prudent if you are selling a house that you have not lived in recently (such as a rental). However, you don’t have an obligation to seek out hidden, unknown defects.
o Federal Disclosures - Lead Paint
In addition to state-mandated disclosures, for certain older houses, federal law also requires a lead paint disclosure. (42 U.S. Code § 4852d). If your house was built before 1978, you must provide the buyer both a pamphlet titled “Protect Your Family From Lead in Your Home” and a lead paint disclosure. Additional information and sample forms can be found on the HUD website.
o Fully Disclose All Known Defects, Even If the Buyer Retains an Inspector
o To protect his or her investment, a buyer may have the house professionally inspected. An inspector will do a thorough examination of the house and likely prepare a written report. However, the inspector can’t see water damage through fresh paint, determine whether underground plumbing is leaking, or otherwise find hidden defects. If an inspector misses a defect you knew about and failed to disclose and perhaps even took steps to hide, you are at risk of being sued.
o To Avoid Being Sued, Be Truthful
It is critical to be truthful when making disclosures to home buyers. If you fail to disclose a known defect, the buyer may sue you for fraud. Amongst other potential remedies, a buyer may seek to rescind the transaction or sue for monetary damages. Defending a lawsuit is stressful, can cost tens of thousands of dollars (or more), and take years to resolve.
Being honest about existing defects on the disclosure statement may result in additional negotiations with the buyer. In most cases, disclosed defects can be worked around. If not, at least you will not be sued by the buyer after he or she discovers the defect! Covering up material defects will cost more in the long run.
The bottom line is that an honest and complete disclosure is the best way to avoid defending a lawsuit from a disgruntled buyer. If you have questions about the disclosure statement, ask your real estate agent
o Federal Disclosures - Lead Paint
In addition to state-mandated disclosures, for certain older houses, federal law also requires a lead paint disclosure. (42 U.S. Code § 4852d). If your house was built before 1978, you must provide the buyer both a pamphlet titled “Protect Your Family From Lead in Your Home” and a lead paint disclosure. Additional information and sample forms can be found on the HUD website.
o Fully Disclose All Known Defects, Even If the Buyer Retains an Inspector
o To protect his or her investment, a buyer may have the house professionally inspected. An inspector will do a thorough examination of the house and likely prepare a written report. However, the inspector can’t see water damage through fresh paint, determine whether underground plumbing is leaking, or otherwise find hidden defects. If an inspector misses a defect you knew about and failed to disclose and perhaps even took steps to hide, you are at risk of being sued.
o To Avoid Being Sued, Be Truthful
It is critical to be truthful when making disclosures to home buyers. If you fail to disclose a known defect, the buyer may sue you for fraud. Amongst other potential remedies, a buyer may seek to rescind the transaction or sue for monetary damages. Defending a lawsuit is stressful, can cost tens of thousands of dollars (or more), and take years to resolve.
Being honest about existing defects on the disclosure statement may result in additional negotiations with the buyer. In most cases, disclosed defects can be worked around. If not, at least you will not be sued by the buyer after he or she discovers the defect! Covering up material defects will cost more in the long run.
The bottom line is that an honest and complete disclosure is the best way to avoid defending a lawsuit from a disgruntled buyer. If you have questions about the disclosure statement, ask your real estate agent
Step 2: Give Eerie Rumors the Ax
o If you fall into that category where you know your aging house isn’t haunted or cursed, but everyone else thinks that it is, your home falls into that wonderful category known in the industry as psychologically impacted or a stigmatized home. That’s a term that casts a wide net over a house’s perceived problems.
o “Some people might see living next to a highway as living in a stigmatized home,” Sachs says. “Or if there are high-tension wires and a power grid next to the house, the potential buyer might think, 'Great, am I going to get cancer?' Never mind that there is no medical research indicating such a thing.”
o In other words, you can’t prove the unproven. If your neighbors think your house is haunted by spirits and that a new buyer might often be bumped in the night, how are you going to prove them wrong? If that’s your situation, you need a plan.
Step 3: Rest in Peace After Last-Resort Tactics
o "You may have to bring the price down, way down,"
o "You may have to make it attractive for an investor, not for someone who will live there, but someone who will want to scrape the house and build anew."
o Full and honest disclosure. The Ghostbusters case. Seller didn’t disclose. And buyers won the case.
If you are selling residential real estate in Oregon, the law requires that you deliver to each buyer who makes a written offer to purchase your property a property disclosure statement (ORS 105.465(2)).
The requirement applies whether you are selling a single family home, duplex, triplex, quadplex, condominium unit, timeshare, or manufactured dwelling.
o According to Realtor.com
• 32% yes they would buy a haunted house and
• 33% maybe they would be open to live in a haunted house.
*Part of this is from an article in the Oregonian in 2015/2019 – it will give you some background info on Disclosures in our state
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