It amazes me that buyers and buyer’s agents don’t sit down and write their own addendum to the Seller Disclosure Form. In the hot market it likely would have scared the seller, and lost you the house in mulitple offers. But this is a Buyer’s Market! Where are the changes as we shift from seller’s market to buyer’s market?
My number one piece of advice for buyers and buyer’s agents today would be to supplement the Seller Disclosure Forms with some REAL questions you would like answered by the seller.
You know the forms at best run up the middle between seller’s interests and buyer’s interests. You know the forms are geared to “a smooth transaction” and closing for the agents and all parties. So why do you accept their questions on the form as being all you need to ask and know?
I’ve written a skazillion posts over the last three years on what buyers need to know that no one tells them. Not the seller. Not the agent. Not the home inspector. Why not put these questions in as an addendum to the things you want the seller to tell you?
Recent comments from Jerry the Seller who wants to keep the buyer’s Earnest Money, are the impetus for this post this morning. Read the comments of Jerry the Seller and weigh in…should the buyer get their Earnest Money back…or should Jerry get to keep it?
Be smart buyers!!! Write down the questions YOU want answered, and make the offer contingent on your getting and reviewing those answers. Don’t merely rely on the questions someone else deemed “enough” for you to know.
As a buyer, it would be nice to know what items are hidden in the yard. The disclosure forms already have sections for common utilities (such as electricity, natural gas, telephone service, cable TV/internet service, drinking water, waste water, and storm drains). The disclosure forms also already have sections for underground oil storage tanks. It would be nice to have a section like:
Does the property have:
* Buried concrete fence posts?
* Buried former foundations?
* Tree stumps (larger than 6″ diameter) that have not been removed?
* Buried pipes or conduits (other than any utility lines discussed on form _________)? If so, what were they for? (For example, sprinkler lines, drip irrigation lines, low voltage wiring, et cetera.) If so, what are they made of? (For example, cast iron, steel, rubber, PVC, PEX, unknown material, et cetera.)
* Are there any parts of the yard where you have noticed that the soil conditions caused plants to grow poorly or die?
If the answer is yes to any of these questions, please indicate the affected area of the property. To the best of your knowledge, please indicate how deep the item(s) or soil condition(s) are.
My wife and I recently purchased a lot in Maple Leaf. Our agent explained the disclosure forms to us. He pointed out that if the seller marks “Yes” or “No” on the disclosure forms, they are taking on liability if the item turns out to not be in as good a shape as they thought. When his seller clients fill out the forms, he encourages them to mark “Don’t Know” instead of “No”.
Fortunately, the lady who sold us the lot was unaware of this advice. She filled in “Yes”, “No”, and “Don’t Know” to the best of her knowledge. We found the distinction between “No” and “Don’t Know” to be quite helpful. It would be nice if the law encouraged our seller’s distinctions, by not punishing sellers for incorrect answers that were made in good faith.
Also, the disclosure form needs a column for “Not Applicable”, instead of just “Yes”, “No”, and “Don’t Know”. Fortunately, our seller marked “N/A” instead of filling in the inapplicable items.
It would be nice if people listed items, as you did, and we could get a good list together.
Mine would be about asbestos, since home inspectors have a disclaimer that they don’t have to tell the buyer about asbestos in the home, and while some my say something verbally, most don’t include it in the written report.
Jasper,
I once had an over 70 year old seller client whose husband had passed recently, who kept calling the toilet the sump pump because it was a below grade toilet with “a pump” up to the sewer line. 🙂 I think that the buyers should meet the sellers (when possible) before they read the disclosure form, to get a feel for how accurate that info might be.
In the case of the 70+ year old seller with little knowledge of the home terminology, we wrote a special disclaimer.
Another set of questions that is not in the disclosure forms:
Have you removed any tree(s) from the property? If so, why?
Are you aware of any tree(s) (and/or tree limb(s)) on the property that fell and damaged power line(s) and/or structure(s)?
Are you aware of any tree(s) (and/or tree limb(s)) within 200 feet of the property that fell and damaged power line(s) and/or structure(s)?
If the answer is “Yes” to any of these questions, please indicate when the damage or removal occurred, and where the tree(s) were located.
While I agree with this idea overall because I don’t find the current seller’s disclosure THAT helpful, how would you suggest we start implementing this kind of change without going off forms and practicing law? Should we add another page to the current form with questions from a buyer when the offer comes in?
I have helped buyers get questions answered by making a list of items for the seller to “identify” or “explain” to my buyer using the inspection response form and asked questions verbally up front, but never with an offer.
Ardell,
Most of the boilerplate text in the disclosure forms is well thought out. Unfortunately, the “Proximity to Farming” statement is counter-productive. I am not aware of any farms near Maple Leaf, yet the disclosure statement for our lot said that it “may lie in close proximity to a farm.” It would help if there was a place to mention a nearby farm, or if the buyer was referred to a place they could look up nearby farms.
— Jasper
In California we have a Seller Property Questionnaire. It is very detailed.
Courtney, wouldn’t it just be a blank sheet of paper where the buyer would write down their questions for the seller to answer? Man I wish I would have done this on my last house!!
Ted,
I remember a question where I was in CA like: “Did anything bad ever happen in this house.” I loved that one. Is it still there? I think it also asked about outside noise factors. Do you have a neighbor with a barking dog?
Rhonda,
A buyer’s agent would come up with their own pre-printed form, and a means to be sure it is part of the Form 17 as to “right to cancel”. Often there is an extra page on the Form 17 where the seller “explains” stuff.
Some questions will be generic and can be done in advance, but some will be specific to that property. So some extra blank lines should be on the form to be completed differently with each offer depending on the house.
Unfortunately, common practice is for agents to have sellers complete disclosure forms before they have a buyer. That’s relatively new and I don’t like it. With a house on market for 5 months, sometimes things happen between the time it is listed and the property sells. Better to have the seller fill it out when they get an offer, so the buyer has more input as to the questions being answered.
I’ve tried a meeting with the buyer and seller where the seller walks through the house and explains things to the buyer. I’ve done that as the agent for the seller as well. I walk and point to each item and explain the defect or improvement.
It doesn’t work with all buyers and sellers, but when it does…it really is a good method of explaining the seller disclosures.
Here is South Carolina, we have a blank section at the end of the seller’s disclosure that allows the buyer to ask questions. I love it because buyers can come up with questions I didn’t think of. Shame on me. Anyway it is a half page of lines and you would be very surprised how many times we ask a question that gives us a surprising answer.
ARDELL,
Since most people haven’t owned the properties since they were built, it would be hard (and mostly impossible) to know everything. That’s why the “to the best of my knowledge” is a reality.
Ardell — a good idea, certainly. However, I’m not sure you can add additional questions to the Form 17 that would be encompassed by the right of rescission. The Form 17 is a creature of statute, not simply an NWMLS form (RCW 64.06.015), although the statute does say the form must contain the required information “at a minimum.” Regardless, the Form 17 was not drafted, like the other NWMLS forms, simply to promote a smooth transaction that leads to payment of a commission.
Given that the Form 17 is defined by statute, I think a safer approach would be to forward the questions to the seller noting that the questions are being asked per paragraph x of the NWMLS Form 21 (“Information Verification Period”). Ideally this would be provided with the offer so that the buyer will then have the full 10 days to verify the information. Regardless, the buyer should inform the seller that answers are to be provided within a certain number of days.
Thereafter, the buyer can confirm the answers to those questions and, if they find a discrepancy, paragraph x gives the buyer an easy out. If it turns out that the seller actually answered those questions incorrectly, the buyer would POSSIBLY have a decent fraud claim against the seller after closing. Ultimately, it is the potential for a fraud claim that provides the buyer with the leverage to ask questions and expect correct answers.
Note, however, that the law recently weakened the ability of a buyer to allege simple fraud because the courts have recently applied the “economic loss rule to claims of fraud. Without getting into the details, lets just say that the law appears to be favoring the sellers on these types of claims. So, in the final analysis, a prudent buyer will investigate every area of concern, regardless of the information provided by the seller.
Kevin,
That’s why I remember the “did anything bad EVER happen in this house?” I was thinking about the house back in Philadelphia built in 1650. 🙂
It’s not so much that the form, which is 5 freakin’ pages long, isn’t thorough enough. It’s that it doesn’t have a lot of the questions a buyer wants to know.
You sell condos. There are very little questions answered about a condo until after someone is in escrow and receives the Resale Certificate.
Practical questions. What you like most and what you like least kind of questions. Though it really is hard to get a seller to tell you the one thing they like least, at times.
Hi Craig,
Thanks for stopping by, and very good points.
What is your feeling about a seller crossing out paragraph x or reducing the number of days to coincide with the inspection time frame?
The issue in the link in the post involves the property next door and King County UGA. I don’t think the form has enough questions about things that affect the buyer that are not specific to the property itself. Some of the questions should involve the issues one would encounter in a neighborhood review.
Knowing the neighbor is planning to add a second story and block the view, yet advertising the fabulous view, comes to mind.
Craig,
If a for sale by owner, and a buyer without an agent, use a NWMLS contract they “get their hands on” somehow, and the buyer backs out, can the issue that it was an “ill-gotten” contract provide an out for the buyer to get his Earnest Money back? Is it at least aruguable?
Ardell:
A seller certainly has every right to strike some or all of paragraph x or otherwise modify the standard terms of any part of the form countract — it would be up to the buyer to decide whether or not to accept such a counteroffer. As for your question about a FSBO transaction where the parties inappropriately use an NWMLS form contract: Without giving any specific advice, I believe that this probably would NOT give rise to any basis for walking away and getting a return of the earnest money. The means by which the parties obtained the form contract is not relevant to a determination as to its terms and binding nature. The NWMLS could certainly go after either or both parties, but as between them I think the issue would be irrelevant.
Ardell,
I agree with your sentiments, you’re looking out for the buyer’s best interest. Craig gave a good explanation about some of the legal ramifications involved. I like the idea of generating a list of questions for the seller.
It’s very important to have a conversation with a buyer when they’re making an offer about getting all their questions answered about the area, the neighborhood, and the specific property. Buyers need to take some time to think about and identify any concerns. Directing questions to the seller is critical. But as you mentioned, some sellers will not know all the answers, especially if we’re dealing with an older home and the sellers have only been there for a few years.
Buyers need to investigate other sources to get the full picture. Attending a building inspection and asking questions of the inspector is also critical. The inspection is a good time for buyers to look even more closely at the property. The buyer should also follow the inspector and ask questions. Pay a visit to the neighbors to learn what they may know about the house and/or the neighborhood. It’s interesting what neighbors will tell you! Talk to the police about the neighborhood. Visits should be made to the schools to check them out. Pay a visit to city hall. If any remodeling has been done, check to see if permits were issued. Cities also have slide maps available to show where slide areas are located. Most people never think to ask this question about a property and the information is ready and available at city halls.
#8- Ted, I’ve purchased property in California and wrote a post about a year ago on the Seattle PI Real Estate Professionals blog about the California disclosure form or should I say book. The sellers fill out a disclosure form, but then buyers receive this huge book about the property. The state has done all kinds of research on individual areas and, subsequently, the properties. A buyer can find out whether the home is located in a liquefaction, slide, earthquake, flooding, fire hazard zone. You can find out whether the home is built on an old military range. The list goes on and I believe the only thing it does tell you is whether the sky is falling! It’s pretty complete and when you buy a property in California, you go in with more open eyes.
Thanks Craig. I think the mls would not go after them except to find the member who gave them the forms to fine the member. My guess, of course.
Debra,
And yet…in CA…many have been “burned” on view issues. Nothing replaces the buyer and buyer’s agent doing their due diligence. There’s always something important to this house in this place…that isn’t on the form.
I feel sorry for buyer’s agents who have had their license for a year or two who think it’s all about “do you want it?” and “Let’s go GET it”. Still, the ones that are selling today DO sometimes have multiple offers. Amazing, but true. The buyers have to do these things quickly during the intitial “due diligence” phase, and not after their legal outs have passed.
The first 10 days are so important! Sometimes, even most times, you have to tie the property up and then do the due diligence. That is hard for many buyers to understand. You don’t make an offer and then go on vacation for two weeks. The first 10 days are very important, and there’s lots of work to be done in that timeframe.
This all doesn’t need to be very complicated. If a seller writes a supplementary narrative to the 17 about conditions that they even dream a buyer would be concerned about, and the buyer asks specific questions that get answered during their inspection period (which wouldn’t “become” part of the 17, but since they would be asked during the contingency period, buyer would still have that right to terminate), and if people tried to be transparent (including their agents), I think everyone would get a lot more comfortable about the process.
Gordon,
It’s not complicated at all. But when you shift from a seller’s market to a buyer’s market, it is up to the people in the industry to make things more buyer oriented during that period…until the pendulum swings again.
Buyer Agency, which is still in it’s infancy historically speaking, needs to progress. This morning I jumped out of my chair when the person speaking said “sellers are clients and buyers are customers”. There is so much to be done…
In reading this post and comments, my sense is that people in Seattle and California, and perhaps other places, are hyper-sensitive to a lot of things we don’t even think about here in Texas.
Here, the seller is at minimum required to complete the state required seller disclosure, which is a whopping 2.25 pages long, and covers the main items that 98% of Texas buyers would want to know (major mechanical, slab, roof, utilities).
The TAR form is 5 pages, and that’s the one most of us use. Our Austin Board of Realtors form is even longer, but we don’t let our sellers use that one because it’s too detailed.
Which brings up the point I’d like to make. As a listing agent, I’d be very concerned about the liability that saying too much can create. Having a seller making unrequested, proactive declarations about the condition or state of the property has big downside, and little upside.
Beyond the normal, common set of disclosure items, it is up to a buyer to discover/determine if a property meets their needs. It’s not up to the seller to volounteer a lot of info that most buyers would never even think about asking (such as buried tree stumps).
That said, we would have a seller gladly respond to such questions, but I think the presentation of a long pre-fab list of questions prior to an offer being made would not fly in our market. It would simply spook the seller and the listing agent. The proper time for submitting such a list would be during the inspection period.
I do enjoy hearing about how our businesses are so different in the various parts of the country.
Steve said: “…and covers the main items that 98% of Texas buyers would want to know.”
Steve, I think until a Buyer’s Agent asks a Buyer Client what THEY specifically want to know, and helps them determine what they SHOULD want to know about the house they are offering on. No one will know if it “covers the main items that 98% of” buyers would WANT to know. The Buyer’s Agent has to help them ask the right questions. That’s why the buyer is paying the big bucks! But until “buyer agents” stop perceiving that they are paid by the seller…that won’t happen in Texas or anywhere else.
Steve said: “That said, we would have a seller gladly respond to such questions, but I think the presentation of a long pre-fab list of questions prior to an offer being made would not fly in our market.”
Steve,
A buyer dependent on the good graces of the seller’s willingness to answer, is such an outdated concept.
The thing that bugs me the MOST in this industry, is the notion of what would “not fly in our market” regardless of whether it is a seller’s market or a buyer’s market. Instead of starting from NO and going from there, when it comes to upgrading “buyer agency” in this Country…we really need to start from YES…when it is a seller’s market. We CLARLY need up upgrade buyer’s minimum rights and control of their side of the transaction.
If we don’t do it…who will?
“The proper time for submitting such a list would be during the inspection period.”
If there is zero obligation for the seller to answer the questions, via the contract, that does the buyer no good.
In fact, a Buyer’s Agent should SEND THE SELLER DISCLOSURE BACK for better completion by the seller, if the seller answers “don’t know” to things they should know.
We have so far to go in this Country with regard to Buyer Agency, and the more agents say that isn’t so, the more I’m convinced we have even further to go.