Picture a dark attic with exposed wiring draped with spider webs and scurrying rats. Stick your head into a slimy crawl space with dripping, moldy pipes and tilted foundation blocks. A termite-ridden cabinet door under a rusty kitchen sink creaks open to reveal a dozen B-52 cockroaches running for cover.
Is your home haunted by the ghost of past leaks, cracks, or even perhaps the spirit of long-departed residents? No one likes scary surprises, even around Halloween. Buying or selling a home can be frightening, but if you are familiar with the process and know how to protect yourself it doesn’t have to be. And ghosts are the least of your worries.
The days of “Caveat Emptor” or “Let the Buyer Beware” are long gone. Sellers are bound by an obligation to disclose. Hawaii State law, as well as common law, requires accurate and complete disclosures be made in writing to the buyer. Buyers have an “escape clause” in virtually all purchase contracts after they review the seller’s disclosures. Yet buyers are often unclear of their rights, and sellers unsure of their obligations.
Here are some questions and answers help you exorcise the specter of fear when you buy or sell. Of course, you should consult with your own Realtor and real estate attorney for advice on your keeping gremlins out or your sale.
Q: My grandmother thought she saw a ghost in the family home we are selling. Does this need to be disclosed?
A: Material facts must be disclosed but experts disagree about the obligation to disclose “immaterial facts” such as ghost sightings. However, since they are required to disclose any condition that might have an affect on the property’s value it is wise to be on the side of caution regarding rumors of spirits on the property, whether you believe it or not.
This raises some interesting questions: if there is a friendly ghost, does this need to be mentioned? Does Caspar add or detract from the value?! And do spirits remain on the property or follow their loved ones to the next home after the sale? How could ghosts be proven to exist, much less shown to have an effect on the value of a home?
Q: I am very superstitions and don’t want to buy a home if anyone has died there. Does the seller have to tell me about natural deaths?
This is open to interpretation. Many people have strong opinions about the power of the supernatural which are crucial when they select a home. These beliefs about death do affect a buyer’s comfort in a home, so they or their Realtors should make specific inquiries above and beyond the narrower obligations in the state law.
Consider those areas of the country where homes are over 100 years old – most homes would have this stigma. Owners of older homes may have no idea of this sort of past history. Concerned buyers may need to bring in their own advisors during their home inspection contingency, which could include a trusted spiritual advisors, exorcist, or Ghostbuster! Blessing a new home is a very common practice in Hawaii, even by folks who don’t own a Ouija board.
Q: Are suicides or violent deaths required to be disclosed?
A: Homicides, felonies, and suicides are considered “material facts” and are specifically asked in Item 59 of the current standard Sellers Disclosure Statement. It must be disclosed if a property has been used as "drug houses", and the possibility of chemical contamination is serious issue.
Q: Which information is necessary to disclose?
A: The disclosure statement must cover 1) information that is within the knowledge or control of the seller, 2) can be observed from visible, accessible areas, 3) anything else that is required in the law (designated flood zones, tsunami inundation areas, and areas subject to aircraft noise for example).
If you have done renovations or enlarged the home, you should also describe who did the work and when it was done. The more details, the better is the rule on major repairs or improvements. When in doubt, disclose.
Q: Can my Realtor fill out the Sellers Disclosure form for me?
A: That is too scary for any Realtor to do on your behalf! The law requires that the seller of record make full and accurate disclosures. Only property owners, not real estate agents or tenants, are permitted to actually complete the written disclosures. To assist in complying with that law, the Hawaii Association of Realtors has created a standard form that covers the main areas of disclosure.
Q: I am unsure of some of the terms on the Sellers Disclosure form. Should I just answer “NA” (not applicable) to those questions?
A: The form is not an easy one to understand, and it uses terms that homeowners may not understand. Do you know if you have easement or an encroachment? And are you certain if you have either? Do you know how to answer questions about hot issues such as settling, leaking, building permits, or other major concerns? For this reason, most conscientious Realtors will want to go over the form in detail to make sure that it is correct and complete.
Q: When should I check the “NTMK” box (not to my knowledge) and when the “NO” box? It’s confusing!
A: It may be wise to check the “NO” box only when you are very sure NO is absolutely true. If there is any doubt, it may be best to select “NTMK”, “not to my knowledge”. Some major issues could be difficult to determine beyond the shadow of a doubt, such as whether there has ever been hazardous substances on the property (item 40), if there is filled land (item 41) or if the property has ever flooded (item 43).
On the other hand, you are expected to know for example if you have a rental agreement affecting the property (item 47) or if you are part of a condominium (item 73), so you should make an effort to give a definitive answer - yes or no on some. For these sorts of questions, NTMK may not be a reasonable response.
Q: When I sell my home, if I disclose a problem does that mean I have to fix it?
A: No. In fact, by disclosing it you are putting the buyer on notice of the problem, and allowing them to investigate it and decide if they want to proceed. Of course, they might ask you to make repairs in order to keep them interested, and you might want to seriously consider agreeing to the repair. In a hot market, sellers can usually sell “as-is” provided they disclose; when the market is slow, they may want to take care of big and small issues in order to keep the sale together.
Q: I am an investor and have never lived in my property. Do I still have to prepare a written disclosure statement?
A: Some owners have never even seen their investments. They must nonetheless make as complete a disclosure as they can based on the information available to them from tenants, property managers, repairmen, and home owners associations. Property owners are expected to dig through their records for work done on their behalf that could affect a buyer’s purchase.
Q: My Realtor said that a property I want to buy might have asbestos in the “popcorn” ceiling material. Doesn’t the seller have to tell me whether it is asbestos or not?
A: As a seller, what you know, you must tell. However, unless you arranged to have the ceiling tested yourself, or you received a report from a previous owner, you may not know for sure. Many home owners have not had this sort of testing done, whether for lead, asbestos, mold, or other possibly toxic substances. However, if you suspect something that a buyer should know based on opinions or rumors, you should mention it as an unverified possibility to be on the safe side.
Q: I am buying a distressed property, and the seller, who is a bank, has refused to complete a seller’s disclosure statement since they took the property back in a foreclosure. Can I force them to disclose?
A: Foreclosed homes can be a challenge for this and many other reasons. No one can force a bank to do anything, no matter how logical is! Your recourse if they fail to comply with the law is to cancel the sale. You may have to rely on your Home Inspection to determine if there are any “red flags” on the property. Hopefully you are getting a bargain to compensate for the risks!
Q: My home experienced flooding about 3 years ago, but I corrected the problem. I hesitate to mention it in case it scares buyers away. What should I do?
A: Disclose it and describe the corrective measures that were taken, when, by whom and whether it has happened again. This will allow the buyer to understand the history and thoroughly investigate the problem. It also reminds them to be vigilant in the future about similar problems. By fully disclosing in detail you can protect yourself from future claims.
A vigilant home inspector may see some evidence as well and your buyers will lose confidence in the home. Or what if the neighbors mention the flooding to the new owners and you have not prepared them. In that case, expect to hear from their attorney.
Q: Is there anything a seller should not disclose?
A: It is illegal to disclose that a current or former occupant of the property is HIV positive, or is infected the AIDS virus. Sellers do not have to say anything about issues unrelated to the physical property, such as their reason for selling, how long they have lived there, or where they are moving to. It may actually erode their negotiating power to supply unnecessary details of that nature.
Q: My real estate agent suggested that I should avoid mentioning that my lights flicker when I use the microwave and the TV at the same time. Is this a good idea?
A: Get a new agent who knows the law and is ethical, or you will both be in trouble! Likewise, a smart and ethical Realtor will turn down a listing from a seller who wants to conceal facts that should be put in the open.
Q: My wife and I want to buy a home but after we read about all of the problems on the Seller’s Disclosure Statement, we are getting cold feet. Can we get out of the deal?
A: You have the right to cancel the purchase and get your deposits returned to you, as long as you are within the number of days stated in the purchase contract. You could try to negotiate with the seller to correct the problems if you still want to buy. Otherwise, your real estate agent should be helpful in getting you out of the sale and find a more suitable home. Another reason to utilize a “Buyer’s Agent” when you purchase a home, since the listing agent has a prior obligation to the seller.
Q: Why didn’t the Seller give me more information on the Seller’s Disclosure form?
A: Some property owners are truly oblivious, and others may have selective memory of problems. Yes, some owners may be “ethically challenged”, but intentionally deceptive owners expose themselves to serious liability. Certain homeowners know every detail of their homes; others have never been on the roof or in the attic. Many homes are cluttered with too many piles of junk and furnishingswhich might conceal problems.
No Duct Tape
Remember that if you as a seller do a cover-up job rather than repair the source of a problem, such as a cracking wall or a leaking roof for example, you could be suspected of concealing material facts. Be sure to disclose issues that you have resolved even if you think they are behind you. The more detailed your disclosures, the safer you are from future problems. That way, they won’t come back to haunt you.
Email Stephanie your scary stories - whether about ghostly sightings or other scary real estate issues.
Important Note: This discussion is not intended to provide legal advice or interpretation of the law, only to illustrate my personal opinion and perspective based on my own experience and understanding. Be sure to consult with a real estate attorney if you have questions or concerns of a legal nature regarding your rights and duties according to the law.
To view the new website, please go to beta.aroundhawaii.com. Around Hawaii will fully transition to the new website by May 8, 2015. Our goal is to provide you with a fast and convenient starting point online. With a single click, you will be able to view the latest local news, sports and original local content all within a single space.