Disclosure Update

Recent Disclosure Changes for Maryland Sellers

For many years, sellers of single family residential property could either fully disclose known conditions and defects in their house, or they could opt to disclaim disclosure. In other words, sellers could advise their prospective buyers, in writing, that the "owner of the real property ... makes no representations or warranties as to the condition of the real property ... and the purchaser will be receiving the property 'as is', with all defects which may exist." Most chose to disclaim and recently, with situations involving competing offers, they have been able to turn down contracts with contingencies for home inspections.
As of October 1st, Maryland sellers must now disclose actual knowledge of any latent defect. The new law defines a latent defect as a material defect in a property, or an improvement to a property, that a buyer (or home inspector) would not reasonably be expected to ascertain or observe by a careful visual inspection and that would pose a direct threat to the health or safety of the buyer or a person living in the property. The law does not stipulate that a seller must investigate whether there are problems, pay for repairs or reveal everything about the condition of their house.
Additionally, if there is a real estate broker or agent involved in the transaction, and if he has personal knowledge of any latent defects, he is legally obligated to disclose those defects to the potential purchaser, regardless of whether the seller discloses or disclaims. The agent or broker cannot assist in fraud.
There are several exemptions to the new disclosure requirement. For example, new homes that have never been occupied (or for which a certificate of occupancy has been issued within one year before a sales contract is entered into) are not required to provide disclosures.
Additionally, if a trust or fiduciary party is involved in the administration of an estate, no disclosures are required.
There is a growing body of law throughout the country relating to disclosure requirements. As we emerge from a time when conventional wisdom held that the buyer should always beware, seller disclosure is becoming an important part of any real estate transaction.
Sellers should not be afraid to disclose known problems in their house. In my opinion it is better to disclose at time of listing, rather than be sued by a buyer after discovering not only that there are defects in the property, but that the seller knew, or even should have known, of before the sale.
I believe it is in the sellers best interest to tell the truth about the condition of their house, especially in a market that it is likely to sell in anyway.
This article is for informational purposes only and should not be construed as legal advice. Seek professional legal counsel if you have any questions regarding this matter. A copy of the new disclosure form can be found at: http://www.dllr.state.md.us/forms/default.htm - re.