Owner can make disclosure or sell the property `as is'


August 15, 2004

An unhappy first-time homebuyer writes that her newly purchased home flooded during heavy rains.

"I thought any problems with a home were supposed to be disclosed," she writes.

Another homebuyer complains that she was unaware until just before settlement that the home she had agreed to buy had a broken air conditioner and a furnace in need of major repairs.

What are a homebuyer's rights when undisclosed defects are discovered?

Builders who sell new homes are required by statute to correct defects that appear within specified times after closing.

But the law does not apply to sellers of other homes.

Under Maryland law, the seller of an older home has the option to make a written disclosure about the condition of the property. Or the seller may disclaim all representations about the property condition and sell it "as is."

The law requires that prospective purchasers must be advised of the "disclosure or disclaimer" option, presumably so that a buyer can make a purchase offer contingent on the seller's providing a full written disclosure of all known defects.

In practice, few buyers insist that the seller make a disclosure. Instead, buyers usually accept a seller's disclaimer and rely on a home inspection to reveal defects in the home. There is little recourse if the home inspector fails to find problems, because home inspection contracts often include provisions that limit the inspector's liability for errors to a refund of the amount paid for the inspection.

Buyers' real estate agents have not been aggressive in insisting that sellers provide disclosures or guarantees that homes have no hidden defects. The printed listing and contract forms developed by the Maryland Association of Realtors and local real estate associations do not require sellers to disclose known defects in their homes.

As a result, homebuyers often are faced with unanticipated expenses to correct defects, which the sellers knew or should have known to exist.

Any change in this system would have to be addressed by the Maryland General Assembly, which could enact a law requiring sellers of older homes to provide a written disclosure of property conditions.

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