We all know that the rules require that the seller either give the buyer a Property Condition Disclosure Statement prior to entering into the contract, or a $500 credit at closing. In my experience, the vast majority of sellers in this geographical area prefer to give the $500 credit at closing. One glance at the Property Condition Disclosure Statement form that the seller would otherwise be required to complete reveals immediately why this would be so.

 

Many of the questions asked require a knowledge of events relating to previous owners or to knowledge which the seller may himself not know, resulting in the answer "unknown." Rather than put a purchaser's mind at ease, answers like "unknown" merely make purchasers suspicious.

 

Furthermore, a factually inaccurate response, if uncorrected prior to closing, may at some later date give rise to an action for fraud. Even if the seller can later prove that the inaccuracy was unintentional, the litigation itself would be much more bother than giving the buyer $500 credit at closing: another case of the cure being worse than the disease.

 

Perhaps most important, many sellers are unaware that declining to give the Property Condition Disclosure Statement and giving the credit instead does not protect a seller from his obligation to reveal a material latent defect or condition in the property. For instance, if the property has a significant underground drainage system which the seller himself installed, but which is located underground partly on his own property and partly encroaching on his neighbor's property (without the neighbor's knowledge or permission), this is a material condition which must be disclosed to the purchaser prior to the sale regardless of the property condition disclosure requirement. The underground system, being latent, is not discoverable by the purchaser even with good due diligence prior to the sale. The encroachment on the neighbor's property is actionable, and therefore is a defect in title. If the seller knows about this and fails to disclose it, he has committed a fraud, and can be sued later after the closing by a buyer who must pay damages or correct the condition. And a word to the wise - if the broker knew about the condition and failed to disclose it, she might have a problem also.

 

Hear no evil, see no evil, and speak no evil only applies to monkeys.