Disclaimer route favored by many realty agents

REAL ESTATE MAILBAG

January 29, 1995|By Michael Gisriel

Q: I'm curious about the effects of the new seller disclosure law? Is the consensus of real estate agents that the law is a plus or a minus. Also, what are the pros and cons about using the disclaimer form rather than the disclosure form?

Robert Beckner, Ellicott City

A: The seller disclosure law applies to all real estate sales contracts entered into after Jan. 1, 1994. Remember, new home sales and foreclosure sales are exempt. Anyone can obtain forms from the Maryland Real Estate Commission in Baltimore (333-6230).

Maryland's mandatory disclosure law is both good news and bad news for home sellers, according to most real estate agents. The good news is that the disclosure form eliminates some risk for sellers -- a buyer cannot say that the seller misrepresented the house because he has been given a written evaluation. The bad news is that the same form can incriminate the seller if a buyer sues. Many real estate agents, therefore, counsel their home sellers to opt for the disclaimer rather than the disclosure if the buyer will accept it.

The No. 1 reason why buyers sue sellers is for failure to disclose defects. In the past, sellers were usually dropped from the lawsuit for lack of evidence that they were aware of the defects. Now, however, the disclosure form can provide material evidence in the case. Sellers could opt for disclaimer forms instead, but there is a trade-off: a disclaimer form can act as a red flag to buyers on potential problems with the house and could potentially hurt you on the selling price.

One option for sellers is to obtain "errors-and-omissions" insurance -- which protects against inadvertent failure to disclose but not against fraud.

Over 90 percent of real estate agents have this type of insurance, and many states have passed laws that make it mandatory for agents. The number of lawsuits over property defects has increased over the last 10 years, and sellers now have much of the same liability as agents.

Most homeowner warranty companies now offer zTC errors-and-omissions insurance to sellers at no cost through real estate agents, who can offer the insurance as part of a package of services for their clients.

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