So what if you know something really bad about your house that you don’t want to disclose? Something so bad it would chase off a buyer, or keep him from giving you full price?
Here in LA we have a law called Redhibition. It gives the buyer of a property the right to demand a partial refund of the sale price; or in extreme cases, the right to completely rescind the sale…. it’s all about buyer protection for what is quite often the largest single purchase in a person’s lifetime.
The premise behind this law is simple. If there is a condition that would have kept the buyer from buying the house, or would have caused him to offer less than full price, then he has the right to recover damages from the seller… up to a year after the Act of Sale.
Unfortunately, some sellers would prefer the principle of “caveat emptor” – buyer beware. It basically says the buyer is buying the property ‘as is’ and he assumes all the risks; thus the reason for a thorough home inspection on the part of the buyer.
However, there are always things a seller will know that will never be revealed by a normal home inspection. First thing that comes to mind for me is flooding.
In 2005 the power of H.Katrina slammed Slidell with massive waves that originated in the gulf and just kept coming – across the Rigolets into the lake, meeting no resistance till they hit Slidell. The sheer power of the water picked up the I-10 and dropped it into the lake. All the homes along the lakefront were severely damaged, Old Town was completely under water, and even homes above Florida Ave that had never flooded, took on water.
That was then; this is now. We have a new I-10, all the homes have been restored, and life is back to normal. Today, even the best home inspection won’t reveal the extent of damage or repairs… just the fact that certain parts of Slidell have all new kitchens and beautiful new flooring thanks to flood insurance.
So in the section of the property disclosures pertaining to flooding, to admit that a home flooded for H.Katrina is no big deal. The dishonesty occurs when a home also flooded for H.Isaac (2012) and the seller makes note of only H.Katrina… It’s called ‘lies by omission‘.
So why would this matter? Because H.Isaac was not a true hurricane as we know them here in SE-LA… Isaac was little more than a bad tropical storm. Heavy wind gusts and 4-days of non-stop rain. For most of us, the biggest inconvenience being the lack of air conditioning and no way to brew our coffee [personally tramatic].
So if a home also flooded from H.Isaac or any other tropical storm, that is a totally different kind of information; indication of a flood prone situation that a buyer would probably want to know about. Definitely a material disclosure.
In the LA Agreement to Buy/Sell there is an ‘as is’ and ‘waiver of Redhibition’ clause. Even at the closing the buyer signs a separate Waiver of Redhibiition. But here’s the point I want to get across here –
The Waiver of Redhibition was not designed to shield sellers who engage in fraud or bad faith by making false or misleading representations about the quality or condition of a particular property.
On the first page of the Property Disclosure form, there is list of parties who are exempt from the requirement to disclose… transfers via foreclosure and succession being the most common. Obviously the lender or asset manager handling a foreclosure would have no personal knowledge about the history of the property. However, there is sometimes a gray area pertaining to successions.
If the executor (or an attorney) for an estate was not close to the deceased, it is understandable he might have little knowledge about the condition of the property being sold. Thus the reason for the exemption.
On the other hand, many times the executor is a close relative, knew the deceased, and was even the one helping out in times of difficulty or in the aftermath of a storm. Quite often the executor may have even lived with the decedent for a number of years. So when a Realtor knows of this relationship, it is paramount that as much disclosure be made as possible, in spite of the exemption.
For example, the executor may need to check ‘not known’ regarding electrical or plumbing systems, but might have knowledge whether the home had ever flooded… it is a matter of integrity that the listing agent ask the right questions and insist on any disclosures that should be made available to the buyer.
Broker Prepared ‘As-Is’ Waivers
In the discussion about disclosures, I have a huge bone to pick with real estate agents/brokers who fail to insist on honesty from their sellers… and even suborn outright dishonesty and deception.
I had a case in N.O. where the seller completed the property disclosures with a Y or N all the way through, but with regards to the roof, checked off NK – for not known. Wouldn’t you know, the buyer’s home inspection revealed plastic tubs in the attic to collect rain water… wonder who put those up there?
When I forwarded the buyer’s Inspection Response, I included a copy of the written report along with photos, and requested a new roof or a price reduction. The seller declined our request, and the sale fell through.
However, in spite of this evidence, the seller did not revise his property disclosure form, nor did the real estate agent add a note regarding the roof condition in the Agent Remarks section of the MLS…. which all real estate attorneys and brokers would agree is a ‘must do’.
Instead, the agent’s Broker had posted on-line a formal release of liability to circumvent the requirement for an honest seller’s disclosure, by having the buyer sign away all rights to any future recourse against the seller, the seller’s agent, or the listing broker regarding the lack of accurate information and disclosure. This document went way beyond the conventional LA Waiver of Redhibition.
Note to agents: Beware of any ‘as-is waiver’ other than the traditional LA Waiver of Redhibition form provided by the LREC.
In closing, the rule of thumb is disclose, disclose, disclose. It’s all about integrity and honesty. If the house has a problem, fix it. If you can’t fix it, own up to it and adjust the price accordingly.
If you are the buyer and you have reason to doubt the information contained in a property disclosure, demand more answers. And finally, if not satisfied with the answers, move on…. there are so many other homes to choose from.