Don’t Ask. Don’t Tell.

Yesterday’s Washington Post (October 1, 2005) had an article in the real estate section about the disclosure requirements in the three area jurisdictions – DC, Maryland, and Virginia. It’s a good article, and it might have gone just a bit further than it did to make the point – withholding information about defects in your home is always a bad idea.

Almost all post-settlement disputes involve house flaws that sellers failed to disclose, and in many cases went to a lot of trouble to conceal. Sometimes, even the most anal compulsive house nerds miss them while performing home inspections. Buyers, who already feel beaten up by the buying process in this area’s strong sellers’ market, can get downright mean when they feel the sellers have defrauded them.

I’ve noticed that some sellers in Virginia think that signing a disclaimer is a license to conceal. While I am not a lawyer, I do think that the Post article overstated the extent to which “caveat emptor” will protect a seller who does not disclose a known defect or health hazard.

I recently had a transaction in Old Town, Alexandria. The day after settlement, my client pulled up the wall-to-wall carpet in the living room to find about 20-square feet of water damaged, rotted out floors that were covered, not just with the relatively new carpet, but also with nasty, black mold. Yes, the seller (who was very nice throughout the transaction) signed a disclaimer. And while it is hard to believe that someone so pleasant would be so devious as to deliberately conceal damage, it’s also hard to imagine how she could not have known about it. It looks like we’ll be able to work things out, but it would have been a lot easier on everyone if she had just come clean in the first place.

So what if the buyers and sellers can’t work things out? Before you think about concealing damage, keep in mind that the Washington area has far more than it’s fair share of people with law degrees buying homes. At least half of my transactions have had at least one attorney on one or both sides of the deal. I would not want to see them angry. Even if your buyer isn’t a lawyer, we all have close friends who are lawyers who are glad to help out.

Not all defects go undiscovered before settlement, even in a situation where the buyer gave up a home inspection to be competitive in a bidding war. Remember, the buyer needs insurance in order to buy the house. Insurance companies all share information in a huge data bank, and many a seller has been busted by State Farm. Today, anyone can go online, and for about $10 can get a full report of the claims history on your house. So, those claims for basement flooding after Hurricane Ivan show up, and your disclosure says nothing about water or flooding issues. If the insurance company knows about your basement, chances are pretty good that you’re the one who told them.

Whether it’s before settlement or after, you will get busted! If your insurance company doesn’t give you up, neighbors often will. Then there are contractors. The Post article had a great example of new owners who called an exterminator to get rid of bees. The exterminator bragged to them about how well he knew the house and how the prior owners had ignored his advice for years. Superior Court, here we come!

No reasonable buyer expects a used house to be perfect. And most expect to find some post-settlement house dings, and they just fix them. And buyers’ expectations are lower when they are buying a granny house from an estate than when they are paying top dollar for a serious renovation.

Bottom line: tell the truth. It’s good advice in most areas of one’s life, especially with you’re selling your house.

Let me know what you think. Send me an email, housepat@mac.com, or better yet, just post a comment on the Blog.

Published by Patricia Kennedy, Associate Broker, WC & AN Miller Realtors, 202-966-0400 x18947.or 202-549-5167