A Multi-Family Home

Dealing With Disclosures: When To Walk Away

by Arnold Gomez

Hot property markets can create a bit of a frenzy, making buyers think they need to pounce on the first property whose owners accept their bid. As part of the selling process, the owners might have to disclose certain problems with the home or property. These are not always severe problems, and often they are more along the lines of "need to know." Yet sometimes the disclosures can be fairly major, and you need to make a decision about whether to walk away.

State Disclosure Laws

First, know that some states have more lenient disclosure laws than others. In general, states now have some sort of requirement to disclose, but occasionally you'll get a state like Alabama, whose property-buying process follows a rule called caveat emptor, which is Latin for "buyer beware." In other words, Alabama home buyers are pretty much on their own and sellers don't have to say anything except in three specific cases: when the seller and the buyer's agent have a financial relationship, when the seller knows the house will be a health or safety risk, or if the buyer asks about a specific issue. In other words, if the seller knows you're allergic to bees but also knows there's been a recurring problem with wild bee hives on the side of the house, the seller has to say something. Otherwise, no disclosure is necessary.

What that means for buyers is that they have to be very aware of the disclosure laws of their state and work with an agent who can help investigate the house for potential problems.

Fear Versus Inconvenience

When you hear about a disclosure, you have to decide if the problem will make the house unlivable for you, or if you merely need to negotiate more on the price and contingencies. A problem with the home could be scary for you, or it could be a mere inconvenience. For example, in Arizona, sellers are required to disclose problems with scorpions appearing in the home. One bug in 20 years might not be a problem, but several bugs a week definitely falls into the disclosure category. For a lot of buyers, that's a deal-breaker because no one really wants to deal with scorpions -- but maybe that buyer owns a pest control company and can wipe out that infestation easily. In that case, the buyer may not want to walk away if he or she can negotiate a lower price considering the extra work needed.  

Saying There Are No Problems When You Know There Should Be Problems

Let's say you're buying in a state with strict disclosure laws. You're buying in an area known for termites and other bugs. The seller says nothing's been wrong with the house and he or she has never needed pest-control help. This is a time when you want to raise an eyebrow.

You and your agent should try to talk to neighbors to find out what they've been through. If they've all had to have regular pest control, for example, then that seemingly great disclosure of "no problems" suddenly becomes suspect. When buying, do your research into the surrounding area and learn what homeowners typically deal with to get a baseline for what to expect when buying.

Your real estate agent is a big help here because he or she will know what homes usually go through. Work with your agent to find a property for sale where disclosures are not going to be issues.