Craig Franklin Chambers, Attorney at Law

August 22, 2013

What Is The Seller's Property Disclosure?

Colorado Real Estate Law and Family Law Blog (Vol.1.13)

by Craig Franklin Chambers, Esq. The Littleton Lawyer.

As a Denver family law lawyer and real estate attorney specializing in Littleton, Denver, South Jeffco, Lakewood, and Highlands Ranch, I often handles disputes over residential real estate contracts and the Seller's Property Disclosure. Usually the dispute concerns problems with the home discovered by the Buyer after closing--- defects in the condition of the home the buyer believes should have been disclosed by the Seller prior to close.

These disputes over a residential real estate transaction can include--not only physical malfunctions such items as the furnace or the presence of mold -- but boundary disputes,  easements, Special Assessments from the county or the Homeowner's Association and zoning violations. Because a residential real estate transaction is a part financial and part emotional decision, disputes such as these can easily escalate into litigation.

Under Colorado law, although private home warranties are available for purchase, there is no warranty from the Seller for a resale home. Colorado case law only requires that a Seller disclose material latent defects of which he has actual knowledge. This requirement falls upon the Seller as well as upon both the listing broker and the selling brokers for the property.

In addition, as a term in the real estate contract, the Seller usually completes a Colorado Real Estate Commission form known as The Seller's Property Disclosure. In filling out the disclosure, the seller reviews a checklist asking questions about the condition of the major elements in the property. These questions concern structural conditions,  the roof and appliances, and electrical, telecommunications, mechanical, heating and plumbing conditions. There are also questions about the source of water and sewer for the home, questions about zoning,  environmental, health and safety conditions, and common community association issues.

There are several problems with the way the Seller's Property Disclosure is usually handled in a typical residential real estate transaction. The Seller often make mistakes in completing the form. Because of the disclosure's broad scope, it often contains questions and terms about improvements and issues that do not exist in your particular home. The Seller rarely does a thorough job in filling out the disclosure. The Seller may under-estimate, misunderstand or misrepresent the questions asked on the checklist. The Seller  may or may not recall all of the problems with the home.

The Seller's Property Disclosure is often completed by the Seller at the time the home is listed, rather than at the time an offer is received. Although the Seller is required to update the disclosure prior to closing, this event rarely occurs.

The best suggestion I have for the Seller is to only disclose material latent defects of which the Seller has actual knowledge as required by law, and not to fill out the Seller's Property Disclosure form. Completing the form is merely another term in the contract that can be deleted in the contract negotiations.  Banks and investors often refuse to fill out the disclosure form or limit their responses because they have no personal knowledge of the condition of the home.

If you do complete the disclosure, the worst thing you can do as a Seller is guess on the form. Read the questions carefully. Verify your answers. If you don't know the answer to a question, simply state you do not know. Despite all the warnings on the form, buyers often rely on the Seller's Property Disclosure when determining whether or not to purchase the property.

The best tip for the Buyer--simply do not to rely on the Disclosure. The Seller's Property Disclosure is not a warranty or a guarantee of the accuracy of the condition of the property. Rather it is the Seller's impression of the property. It is at best an indication of possible problems with the home and at worse, an indication of the candor of the Seller.

The form only requires the Seller to disclose the condition of the home to the best of his "current actual knowledge." Actual knowledge is what you can prove the Seller actually knew about the condition of the home. Constructive knowledge, which is much easier to prove, is knowledge about the home a  Seller should or could have known. With disputes arising over the Seller's disclosure, a buyer would have to prove that the Seller did in fact actually knew and failed to disclose the condition which is in dispute.

When making your offer, give yourself enough time in the contract to thoroughly verify the condition of the home with your own experts, including zoning issues and the culture and financial health of the Homeowner's Association. Don't be shy. If you are worried about crime, visit the local police precinct. If you are interested in schools, make a personal visit.

If the home is a new build, check with the neighbors who have already closed to determine if the builder is reliable with punch-list and warranty issues. If the home is in a Homeowner's Association, talk to the neighbors to determine the culture of the community. Speak to the Management Company, the members of the Board, attend the HOA meetings, review the minutes, the financials, and the newsletters. It is not only a home, but a home within a community that you are buying.

Know what you are buying. Go in eyes open with every aspect of the purchase. This due diligence may cost slightly more or take up more time, but a residential real estate transaction is a major investment.

These cases rarely merit damages material or sufficient enough to go to court. My job, as a Littleton, Colorado and Highlands Ranch real estate and family law attorney is to represent you zealously if you go to court; as an attorney, it is also my job to advise you the best ways to greatly reduce the odds of going to court.

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    Denver Real Estate and Family Law Attorney
    Licensed to practice law in Colorado since 1997, I have a B.A. from Vanderbilt University and a law degree from the University of Denver.

    7851 S. Elati St. #101 Littleton, CO. 80120

    303-972-2552

    craig@craigchamberslaw.com