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Know & Tell: Understanding Seller's Real Estate Disclosure Requirements

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As most real estate professionals know, under Minnesota law, sellers of Minnesota real estate – as well as the agents involved – are required to make disclosures regarding conditions that may affect the use and enjoyment of a property. Understanding disclosure requirements will enable agents to be more effective in representing their clients and in avoiding liability for inadequate disclosure.

The current seller disclosure laws provide clear obligations for sellers and their agents. Seller disclosure requirements apply to residential property, including single-family homes as well as condominiums and townhouses. There are a number of exceptions stated in Minn. Stat. §513.54, but, unless the transaction fits within these exceptions, the disclosure requirements must be followed.

Before signing a purchase agreement, sellers and their agents must disclose all material facts of which the seller or agent is aware that could adversely and significantly affect (1) an ordinary buyer’s use and enjoyment of the property; or (2) any intended use of the property of which the seller or agent is aware. These disclosures must be made in good faith and based upon knowledge at the time of the disclosure.

What is a Material Fact?

Material facts can include, but are not limited to:

• Physical defects in the property itself.

• Existing damage to the home.

• Development around the property.

• Failure of mechanical systems.

• Knowledge of water intrusion problems or other construction defects.

• Past repairs related to the property.

In addition to the disclosure of material facts, the seller must, before signing the purchase agreement, make written disclosure of any knowledge seller has that methamphetamine production has occurred on the property. If methamphetamine production has occurred on the property, the disclosure must include additional specific disclosures regarding clean up obligations.

Sellers and their agents are not required to disclose that the property (1) was occupied by a person who is or was suspected to be infected with HIV or diagnosed with acquired immunodeficiency syndrome (AIDS); (2) is the site of a suicide, accidental death, natural death, or perceived paranormal activity; or (3) is located in a neighborhood containing any adult family home, community-based residential facility, or nursing home.

Note that providing the required information to the agent representing the buyer satisfies seller’s disclosure requirements. If the selling agent receives the required disclosure from the seller, it is then that agent’s responsibility to provide the prospective buyer with a copy of the written disclosure. In addition, any disclosure information provided to an agent (or independently known by the agent) must be communicated to the prospective buyer.

If, however, a prospective buyer has either obtained or been provided with a written inspection report from a qualified inspector, the seller is not required to disclose information regarding the subject property unless the buyer provides the seller with a copy of the report and seller and/or his agent is aware of material facts that contradict any information included in the report.

The seller’s disclosure responsibilities continue to the point of closing. Minnesota law states that a seller must notify a buyer as soon as reasonably possible if the seller learns that a prior disclosure was inaccurate or if any additional material facts regarding the property become known before closing. Failure to properly revise a previous disclosure when new facts arise can subject a seller to the same liability for failure to disclose material facts in the original disclosure.

A seller and a prospective buyer may jointly agree to waive the written disclosure requirements. In order to do so, buyer and seller must have a written agreement clearly indicating that the disclosure requirements are being waived. Of course, a property may be sold in an as-is condition, the effect of which is often the same as waiving the disclosure requirements and waiving any warranties made regarding the condition of the property. However, if a seller provides a seller’s disclosure form even though the property is to be sold as is, the very act of making disclosures voids the as-is aspect. If a home is truly being sold as-is, there must be specific written waiver of all disclosures, and no disclosures should be made, either orally or in writing.

Clearly, the issue of seller disclosures is not one that can be covered briefly. Real estate agents should, however, take all necessary steps to stay informed about all disclosure obligations – both their own and their client’s. Watch for future columns on disclosure!

Published in Vol.3 No.2 of Real Estate Agent Magazine.