As a seller, you are required by law to disclose any existing problems or issues with your property. If you don’t, you may face litigation brought by a disgruntled buyer. Almost every state in the US has statutes mandating that property sellers advise buyers of certain defects before closing. And the typical way of advising buyers about problems/defects is by means of a disclosure form. Even if you simply forget to include something on the form, you may still be subject to legal action. Read on, then, to find out about 3 consequences of not disclosing problems with your Northern Kentucky property.
1. The Possibility of Legal Action
The larger consequence of not disclosing problems with your Northern Kentucky property is the possibility of legal action brought by the buyer. So let’s see how this can happen and what you’ll be looking at.
As we indicated just above, filling out the disclosure form as honestly and as thoroughly as possible will go a long way toward keeping you out of hot water. A typical form will ask you to state what features your home has, such as appliances, roofs, systems, and so on. Then you will be asked to describe the conditions of these features. You’ll also need to include information about such things as pests, environmental hazards, and legal disputes concerning the property.
In addition to these things that the explicitly asks for, there may be an “Other” section in which you are asked to disclose any material defects not already covered in the form. A material defect is defined as one that is significant enough to impact the buyer’s decision to go through with the purchase.
When it comes to disclosing problems, industry pros advise that you include more information rather than less. Honesty is always the best policy even for seemingly minor problems.
If, however, you fail to disclose any problems, you may be subject to legal action. Certainly, the buyer can take legal action if you lie about or cover up problems, but also if you fail to include something on the disclosure form through mere inadvertence.
Following are the top reasons that sellers may face legal action . . .
- Rating a home feature as being in better condition than it actually is
- Failing or forgetting to mention a material defect
- Covering up or lying about a material defect
Note that the emphasis in all this is on material defects. So if, for example, you forget to mention a small scratch on a window or a chip in the baseboard, you don’t need to worry. A buyer wouldn’t have a case for nondisclosure over minor things like these.
2. Specific Claims You May Be Subject to
When a seller is guilty of not disclosing problems, the buyer can make one (or more) of three types of claims: breach of contract, misrepresentation claim, and non-disclosure claim. So let’s take a closer look at each of these . . .
Breach of Contract Claim
For most residential homes, the sale contract will have provisions treating disclosures, often titled “Sellers Property Disclosure” (the disclosure form we mentioned earlier). Because it is part of the contract, this disclosure form is then a contractual agreement and requires the seller to treat it accordingly. Failure to meet contractual obligations with respect to disclosure can open up a seller to a breach of contract charge.
Misrepresentation Claim
A misrepresentation claim can be brought when the seller claims or acknowledges something that is not in fact true. Basically, it is what can happen when the seller lies about problems or defects.
Non-disclosure Claim
A non-disclosure claim can be made when the buyer discovers that the seller remained silent about/failed to mention a problem/defect that he was obligated to disclose. Basically, it’s a claim that can be made because the seller covered up a problem.
To find out more about the common claims for not disclosing problems in your market, you can consult a Northern Kentucky agent. Just call (859) 780-3000 to discover more.
3. Damages You May Have to Pay
Another consequence of not disclosing problems with your Northern Kentucky property has to do with damages you may wind up having to pay. The types of damages commonly awarded in lawsuits concerning failure to disclose are . . .
Compensatory Damages
These are related to the out-of-pocket expenses incurred by the buyer when making the needed repairs to and/or ameliorating defects in the property. Compensatory damages also serve to provide compensation for the buyer in the case of any reduction in the value of the property stemming from the non-disclosure.
Punitive Damages
The purpose of these damages, as the name suggests, is to punish a seller and/or her agent involved in the failure to disclose. Such damages are often awarded in addition to compensatory damages, but to make them stick, the buyer’s attorney has to prove that the violator(s) deliberately concealed material facts.
Rescission/Rescinding the Contract
This one is rare, but it does happen. It involves a buyer’s being given the opportunity to rescind the real estate contract. That is, the seller gets her property back, and the buyer has her complete purchase price returned. The final result is that everyone is in a position as if no transaction at all had occurred.
Help Avoiding Legal Action for Not Disclosing Problems
As you can see, not disclosing problems can have some pretty severe legal ramifications and consequences. And you can even get into legal trouble by simply forgetting to disclose a major problem/defect. So don’t take any chances. Be sure to work with an experienced Northern Kentucky agent who can guide you through the process and ensure that you disclose everything you should. If you don’t want to suffer any of these consequences of not disclosing problems with your Northern Kentucky property, contact us today at (859) 780-3000.