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Protect Your Client & Yourself – Understand Real Estate Disclosure Laws

Do you know what you can or should disclose to potential buyers?

Understand real estate disclosure lawsEvery state has different disclosure laws when it comes to listing and selling a home.  Most states require that the seller and the listing agent disclose any “material facts” to the potential buyers, which could include a leaky roof, defective furnace, or issues with the foundation.  But there are other issues that you may have to disclose that aren’t related to the structure of the home.  For example:

If someone dies in the home, California sellers must reveal to potential buyers if a death has occurred anytime in the past three years,  In Alaska and South Dakota, only suicides or murders in the home must be disclosed if they happened within the past year. Every state varies on this issue, so check with your real estate commission and contracts.

What if there are lots of noise, smalls or even airports nearby?  In North Carolina sellers must  disclose noises, odors, smoke or other nuisances from commercial or industrial areas that may affect the property. Michigan requires sellers to disclose farms, landfills, airports and other nuisances in the vicinity.

What about sex offenders in the neighborhood? Megan’s Law is a Federal Law requiring a public registry of known sex offenders, was enacted in 1996. According to Realtor.com, “Implementation was delegated to the states, including the issue of whether real estate licensees have a duty to disclose information concerning sex offenders. Unfortunately, few states have clarified the extent to which real estate licensees must investigate or disclose such information.”

If you are a real estate agent in Georgia, the following is a MUST READ….

The Importance Of Understanding Megan’s Law in Georgia

Sex offender disclosures when selling a homeMost real estate agents are aware of the clause in the GAR Purchase and Sale Agreement which places the responsibility on the Buyer to inspect the neighborhood, including the possibility of a registered sex offender residing nearby. However, rather than relying on this clause in the contract to mitigate potential issues, real estate agents should actively encourage buyers to partake in research and due diligence. More importantly, listing agents should disclose known material facts regarding neighborhood conditions, such as any known registered sex offenders.

A real life situation recently occurred in a transaction wherein the seller and the seller’s real estate agent were aware that a registered sex offender lived next door, but the fact was never disclosed to the buyers. The buyers learned of the neighbor’s status shortly after closing, when they received written notice from the local police department, a disclosure requirement under the federal “Megan’s Law”. (Congress enacted a federal version of New Jersey’s Megan’s Law in 1996 as an additional section of the federal Violent Crime Control and Law Enforcement Act of 1994.)

In this particular transaction, the seller’s real estate agent believed that disclosure was not necessary unless a potential buyer made an actual inquiry about the presence of registered sex offenders, and that the duty to inspect was a buyer obligation. The buyers sued the seller and the seller’s agent, alleging failure to disclose a material fact regarding the property, intentional misrepresentation and diminished property value. In turn, the seller filed a cross claim against their agent seeking indemnification by claiming they received negligent advice regarding non-disclosure. The court ruled that the presence of a registered sex offender was a known material adverse condition for which the real estate agent did have a duty to disclose to potential buyers.

Brokers and real estate agents should be familiar with the Megan’s Law enacted in their state. If a potential buyer asks about the presence of a sex offender in the neighborhood and the agent is unsure, they should refer the buyer to the local agency that maintains the registry of offenders. On the other hand, if an agent has actual knowledge that a sex offender is in proximity to the subject property, they should disclose that fact and specifically cite their source of information.

 

More Articles about Real Estate Disclosures and Megan’s Law

You & Megan’s Law

Real Estate Flipping – 8 Disclosures You Must Make

When you need to disclose a death in your home

Megan’s Law – Duty to Disclose

 

** Please note that this information is deemed reliable but not guaranteed.  Information is subject to change, based on Federal and State regulations.

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