Proposed new law may force owner to disclose defects

LET THE SELLER BEWARE

December 15, 1991|By Adriane Miller | Adriane Miller,Special to The Sun

*TC Maryland has all the signs of a buyer's market: low mortgage rates, motivated sellers and an abundance of homes for sale.

But sellers still might have an unfair advantage: They can play dumb about the condition of their homes. Aside from an ethical duty, sellers have no obligation to list any problems with their property unless they are specifically asked, says Ed Hilley, executive vice president of the Maryland Association of Realtors.

Buyers who think they are getting a dream house, he says, sometimes end up with a nightmare. And the agent often is blamed. In fact, two-thirds of all lawsuits against the nation's real estate agents allege misrepresentation or failure to disclose defects, the National Association of Realtors says.

"[Sellers] might know the radiator doesn't work but they don't say anything," says Janice B. West, a Realtor with Steve Campbell Realty Co. in Baltimore. "In springtime, you're not thinking about the heat. It's not that the seller is hiding it. It just doesn't come up."

Now, the state association wants to make sellers more accountable for serious problems that they did not reveal to the agent or buyer.

Spurred by the NAR, the state association is drafting a legislative proposal that would require sellers to list all known defects and problems for potential buyers. The association hopes to get a property disclosure bill introduced in the 1992 General Assembly session, which begins in January.

Only two states, California and Maine, have property disclosure laws. Maine requires seller disclosure only when the real estate is listed with an agent. Maryland's proposed legislation, like California's, would require all home sellers to disclose problems about the condition of their property, whether they are selling it through an agent or by themselves.

William Leibovici, chief of the Consumer Protection Division of the Maryland Attorney General's Office, says sellers already are legally required to disclose "material" facts about their property when asked.

That includes any information important to someone making an informed decision. But Joe McGraw, director of the Greater Baltimore Board of Realtors government relations department, says the definition of "material" facts is open to interpretation. The bill backed by the Maryland Association of Realtors, he says, would require sellers to disclose very detailed information about their lot and house.

"It simply lays all the cards on the table," Mr. McGraw says. "It's one of these rare pieces of legislation that's good for everybody.

"Disclosure would be a useful service to the buyer. It raises a red flag and he can say, 'Maybe I should have that checked out.' The seller would be protected from any lawsuit brought by the buyer because the seller can say, 'You knew what you were buying.' And if the seller should lie, there's clear evidence the buyer could use."

The legislation may benefit realty agents most of all, by reducing the possibility of being sued over defects they were unaware of.

If a property is discovered to have defects the agent did not reveal to the buyer, even if the oversight was unintentional, the buyer may hold the agent liable, according to the attorney general's office.

To protect themselves, agents can ask the seller specific questions about a house's condition, Mr. Hilley says. Or, they can suggest that the buyer hire a home inspector. But without property disclosure legislation, he says, the agent is in a "treacherous position."

Tammy Kolb, a Realtor with Prudential Preferred Properties, says most agents and sellers now voluntarily disclose facts about houses for sale anyway, to reduce their liability.

Using a voluntary housing condition questionnaire, Ms. Kolb and other Realtors ask sellers pointed questions about their property and structure: Has the house plumbing ever backed up, for example. Other questions on the forms might include whether the basement floods, whether a fence is installed outside property lines, or whether there is any cracking problem in one of the walls.

"Most people know if they are buying an older home, they are buying it as is. But I don't think [mandatory disclosure] is a bad idea," says Ms. Kolb. Particularly, she says, if it protects agents from disgruntled buyers.

Cindy Fultz, a Bel Air resident who is selling her single-family home without an agent, is surprised property disclosure is not mandatory already.

"I think it would be a good thing, but I don't think that's going to make much of a difference, whether it is a law or not," Ms. Fultz says.

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