Introduction. The seller’s property disclosure form is second only to the home inspection report in giving buyers important information about the condition of the home they intend to purchase.However, these are two entirely different documents. The home inspection report is prepared for the buyer by an independent unbiased professional source. While such reports are certainly not infallible, and are contractually limited in scope, they generally can be relied upon to address visible, or readily ascertainable, adverse conditions in the home and operating systems. However, the property disclosure form is generated by the seller of the home. It does not purport to be a professional report, makes no warranties as to accuracy, is based solely upon the seller’s actual knowledge, and does not alleviate the buyer from exercising their own reasonable care and diligence.
So what value does the seller’s property disclosure provide to potential buyers? The answer depends upon the use to which the document is put, how it is read and interpreted, and whether it is relied upon to the exclusion of a professional inspection. Here are some tips for buyers in reading and understanding the seller’s property disclosure form:
- Buyers must remember that their five business day right of revocation runs from when they receive the form.1 For this reason, it should be reviewed promptly so that any questions or concerns can be addressed within the applicable time frame.
- Notwithstanding the fact that the form contains clear instructions for completion by the seller, sometimes things get ignored. Specifically, where an asterisk (*) appears next to an answer, the seller is prompted to “attach a copy or explain on an attached sheet.” Usually, the asterisk accompanies answers in which the information is potentially adverse, and therefore in need of further explanation.
- However, frequently, no attachments accompany the form, or there is only a brief handwritten explanation inserted in lieu of the required attachment. In some instances there may be an adequate explanation. In many cases, the oversight or brevity of the response may mean that there is material information that the seller would rather not share.
- Sometimes a question is not answered at all. Again, in some instances, this may be the result of simple oversight. However, in other cases, the real explanation may be that the seller either does not want to answer the question or does not know how to, because the answer could reveal a problem the seller wants to ignore.
For these reasons, buyers should closely review the seller’s property disclosure form as soon as received. If there are missing attachments or incomplete answers to important questions, the buyer should immediately have their Realtor follow up with the listing agent. Consideration should be given to simply returning the incomplete form and telling the seller or listing agent that the 5-business day right of revocation will not commence until a completed form is delivered. Alternatively, if additional time is needed to obtain the required information, the parties should try to reach agreement that the revocation period will be suspended until a completed form is re-delivered.
OREF recently developed form No. 028, that allows sellers to fill in their answers to the questions with asterisks. It is quite useful and should be used.
Don’t Ignore Negative Answers! Occasionally, sellers tell the truth on the form – such as answering “Yes” to the question regarding roof leaks,2 but the buyer fails to follow up or request more information. For example, suppose the seller inserts a handwritten notation next to the answer saying that “The roof had a leak in 2013 but it was repaired and hasn’t leaked since.” Buyers should try to obtain more information, such as: (a) What was the nature, scope and duration of the leak? (b) Who performed the repair and were they licensed and bonded? (c) What was the nature, scope and cost of the repair? (d) Was a bid, estimate or report prepared which the seller retained – if so please provide. (e) Did the repair come with any kind of warranty?
If the leak was significant, the buyer may want to have the problem area specifically inspected even if no further problems are disclosed.
Don’t Ignore the Obvious! Sometimes the seller’s answer to a question flies in the face of what the buyer knows to be true. Occasionally, sellers interpret the wording of a question in a way that permits them to give a benign response. For example, if a home has had obvious remodeling, but the question regarding this3 is answered in the negative, the buyer should immediately obtain clarification. The buyer may have answered “No” because they define the words “additions, conversions or remodeling” in a manner differently than the buyer.
“Unknown” Sometimes Means “I’m Unsure and Would Rather Not Answer” An innovation a few years ago was to change the property disclosure form by adding a box for “Unknown.” Although there are times when the seller legitimately may not know the answer,4 there can be times when the seller suspects that the correct answer is a negative one, but elects to mark the box “Unknown.”
For this reason, whenever the answer to a significant question that the seller should know is answered “Unknown” the buyer should be wary. This is especially so where the seller has owned the property for many years and the question relates to the actual physical condition of the home. Again, the question regarding roof leaks is a good example. If a seller who has owned the property for ten years answers “Unknown” to the question whether their roof has leaked, the buyer should nevertheless have the roof and attic thoroughly inspected.
Provide the Seller’s Property Disclosure to the Inspector. Whenever there are negative answers on the seller’s disclosure form, the buyer should bring it to the attention of their inspector or other expert for professional follow-up. This is true even if the disclosed problem has been repaired by the seller. The seller may have been satisfied with a repair that is only a short-term fix, while the buyer may want a long-term fix. Getting a professional assessment of the adequacy of the repair before closing is not only prudent, but may avoid costly problems in the future.
Don’t Rely Upon a “Stale” Property Disclosure Form! If a property has been on the market for some time, it is possible that there have been one or more earlier sale-fails. If so, it is also possible that there have been prior inspections. These inspections may have revealed problems with the property that are not reflected on the seller’s property disclosure form because the form has not been updated.5 Buyers should make sure that the form they are provided with is current and up to date. If there have been prior inspections, copies should be requested.6
Conclusion. Most sellers are honest and genuinely try to answer the questions to the best of their ability. But, for the small percentage who intentionally neglect to answer a question truthfully, the consequences can be costly for the buyer. Vigilance is the watchword. If the form is incomplete, incorrect, outdated, or otherwise inadequate, it is up to the buyer to immediately insist upon more answers – and get a written agreement suspending the 5-business day right of revocation in the meantime. ~PCQ
1 Realtors® must be careful in advising their clients as to when the five days begin. ORS 105.475(1) says that “…the buyer shall have five business days after delivery of the seller’s property disclosure statement to revoke the buyer’s offer….” However, the statute is not clear whether delivery should be calculated from the date of seller’s delivery to the buyer or the buyer’s agent. Both the buyer and the buyer’s agent are expected to sign and date the property disclosure form. But which date triggers the 5-day right of revocation? If the buyer’s agent obtains the report on a date different than the buyer, the parties – through their respective Realtors® – should clarify the matter so there is no disagreement on the issue.
2 The question is: ‘Has the roof leaked? If yes, has it been repaired?’
3 The question is: ‘Are there any additions, conversions or remodeling? If yes, was a building permit required? If yes, was a building permit obtained? If yes, was final inspection obtained?’
4 For questions that come close to requiring a legal opinion, selecting the “Unknown” box is a legitimate safe harbor for sellers, and a much better alternative than having to answer “Yes” or “No” when the seller truly doesn’t know. For example, how many sellers actually know whether there are ‘…any rights of way, easements, licenses, access limitations or claims that may affect (their) interest in the property’?
5 Buyer agents should be careful here. They will frequently know from the multiple listing service how long the property has remained on the market (unless it was re-entered as a new listing). And if they see that the seller signed the property disclosure form several months ago, they should request that the listing agent have their seller update the form – and if the seller claims there are no updates, then have it re-signed and re-dated.
6 Question No. 5. E. asks if the property has been previously inspected within the past three years. If it has, a copy of the report, if available, should be attached, according to the instruction on the seller’s property disclosure form. This is one instance where the buyer should insist that the five business day right of revocation does not commence until the prior inspection(s) is/are attached, since the information contained in the reports is so critical to the buyer’s decision-making process.