The Best Rule of Thumb;

Disclose Everything!


Some Sellers of Real Estate have learned this rule  the hard way; by receiving a claim, long after escrow has closed, that the Buyer has found something wrong with the property that he believes should have been brought to his attention before he agreed to buy the property.  The problem might involve a condition of the property itself, such as a foundation repair or the need for a repair, or it may involve something that is not a physical property condition but makes living in the property more difficult, like a hostile neighbor.  Unfortunately, many times the claim first
comes to light when the Seller, and the Real Estate Agents involved, are served with a lawsuit.

The best way to prevent such a lawsuit is to disclose everything the Seller does know about the property, and to be honest about what is not known.  If the Seller knows that the property has had a drainage problem, she should disclose that, along with copies of all drainage reports and all documentation of repairs made.  If the Seller knows that the next door neighbor plays music loudly at night, or suspects that the neighbor deals drugs from the property next door because of the foot traffic volume, that must be disclosed.  While the Seller may fear that the disclosure will cause the Buyer to back out of the deal, or it will drive down the sales price, the cost of litigation and potential money damages to be paid to the Buyer after the problem comes to light, could be very substantial.  (Plus, the Seller has remedies against the owner of the neighboring property which can also be pursued.)

California law requires that a seller make certain statutory disclosures regarding specific items and further has a common law duty to disclose facts materially affecting the value or desirability of the property, where such facts are not known to or within the reach of the diligent attention and observation of the buyer. Undisclosed facts are material if they would have a significant and measureable effect on market value.  Shapiro v. Sutherland (1998) 64 CA 4th 1534, 1544.    This means the Seller could be liable for the amount by which the property value is decreased due to the problem the Seller did not disclose.

Sellers—and Agents– should be sure to accurately fill out the Real Estate Transfer Disclosure Form and to make further written disclosures—including all documentation in their possession—of all items which can affect the value or desirability of the property, in order to ensure that
once escrow closes, the transaction is really over for good!