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Thursday, January 5, 2017

Disclose, disclose, disclose....

You're listing your house.   Your real estate agent gives you a number of forms to complete.  One of the more important forms is the Illinois Residential Real Property Disclosure Report, which lists a number of statements for which there is a  yes or no answer.   For example one of the statements reads,

"I am aware that the property is located in a flood plain or that I currently have flood hazard insurance on the property."

This form becomes part of the final contract and it is really important to thoughtfully fill it out accurately.   I often see a lot of sellers go through it with little thought and just check everything NO.

Big mistake.  This is a legal document and can come back and haunt you if it is improperly completed.

A good example might be the statement,

"I am aware of flooding or recurring leakage problems in the crawlspace or basement."

The sellers answer NO.  Sure they had a small leakage problem in the spring of 2013, when we had that massive 500-year flood -- but that was anomaly, right?

They don't usually have leakages problems, so NO seems like the right answer.

Or maybe the statement,

"I am aware of material defects in the walls, windows, doors or floors."

Sure there is one window in the attic that is little foggy and has a crack in it -- but it's never had any problems, so it shouldn't be an issue for the buyers, right?

The natural inclination of all sellers is to say NO to every statement.

 The reality is this - often, the better answer is YES with an explanation.

Every buyer is different.   I had some significant problems with my house after I moved in -- things like the soap suds spilling out to the backyard, because the sellers improperly disconnected the sump pump before they moved out of the house.   I could have gone after the sellers and sued them for a number of things, but that's not the way I operate.  Let's just say, these sellers were less than honest when they completed the form, and they were incredibly lucky that I was the buyer of their house.

Other buyers can be very quick to litigation.   What if there is a rain storm of significant magnitude three weeks after the buyers move in?  Trust me, they are not going to be happy if they have water issues in their basement.

But there is another reason for full disclosure.  Consider the window issue.  If you've told the buyers that there is a cracked window in the attic, then it becomes a factor in the negotiated sales price.   They can't come back after the inspection and ask for a credit for repairs, when the broken window shows up on the inspection report.  They already knew about it and factored it into their asking price.

My recommendation?   Read each statement thoughtfully and carefully.

When in doubt: disclose, disclose, disclose!!!

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