The #1 issue that lands home sellers in court

Joan Shaffer August 11, 2017 Denver Real Estate Market Homeowners Sellers Selling

What is the #1 single issue that lands more sellers in court even years after the house is sold? The answer is “lack of disclosure.”

The Seller’s Property Disclosure (SPD) form is one of the most important documents you’ll complete when selling your house. Most disputes that arise after the closing of a real estate transaction come from the buyer alleging some sort of misrepresentation. The buyer claims that the seller knew something was wrong with the property but did not tell him. A properly completed SPD form is excellent protection against such claims.

The law in Colorado requires sellers to disclose latent defects of which they have actual knowledge.

A latent defect is one that is not obvious on casual inspection. A 10-inch long crack in the middle of a 12-inch windowpane is NOT a latent defect since anyone that glances at the window will see the crack. A basement that floods once a year during a hard rain is a latent defect as it is unlikely that the buyer would actually see the house while this problem is occurring.

Disclosure is required if you have actual knowledge of the latent defect. You might have a roof leak that is letting water into the attic but the water is not showing up visibly anywhere in the living area of the house. If you tell a buyer that your roof does not leak and it later turns out that you have a leak into the attic, you have not violated any disclosure requirements.

Strange as it seems, some states make sellers responsible even for things that they did not know and impose a duty on sellers to investigate and discover defects. It is a legal principle known as “strict liability”. This is NOT the law in Colorado. As previously stated, sellers must disclose what the actually know.

Colorado law also states explicitly that certain facts are not subject to disclosure. When selling your house, you do not have to disclose: (1) The fact that an occupant has or is suspected of having AIDS/HIV; (2) The fact that there has been a murder or other felony or a suicide on the property; (3) Any other facts that might psychologically impact or stigmatized a property — some people think the fact that a house is haunted might fall in this category. While not legally required, you may want to voluntarily disclose murders, suicides or felonies. If you have any of those situations, let’s discuss them and decide on the best course of action.

These legal disclosure requirements are theoretically simple but can present practical difficulties. Legitimate questions can arise about what constitutes a latent defect. Let’s discuss those areas where you wonder if disclosure is needed. When in doubt, it is often best to err on the side of over-disclosure.

As a seller, having a real estate professional by your side will help you make the kind of decisions that ensure a smooth, trouble-free transaction. When you’re ready, don’t hesitate to call and let’s talk!

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