Reading Time: 7 minutes

 

 
 

Material fact

The fact that a reasonable person would recognize as significant. In other words, it is a fact, the suppression of which would reasonably result in a different decision.

Nonmaterial fact

Homicide, suicide felony on the property, HIV AND AIDS – Things that do not affect the property’s physical condition or the surrounding area. Varies state to state

 

Seller’s Property Disclosure Act 

is legislation requiring the seller to reveal the property’s honest condition whether a defect is seen or a Latent Defect.

When a woman remolded her old home to look like an antebellum home, the listing agent should advertise the home as “an Antebellum Styled” home.

 
 
 

Patent Defects

 

Latent Defects

Latent Defects

A defect that is not visible or apparent; a hidden defect that would not be discovered in a reasonably thorough inspection of the property.

The least apparent lead product to be found on a property is a lead pipe. It’s a latent defect. (Latent Defect is an unseen defect.) .

 
 
 

Disclosure

A duty of an agent to the principal to discover and reveal information that might adversely affect the principal’s position.

The agent’s obligation to the seller regarding disclosure is to have him disclose all material defects. 

A building constructed off-site is a modular home.

If a seller tells you that the roof was replaced five years ago and the patio was added without a permit, you should tell the seller to disclose it.

When selling a property with an illegal addition of 600 feet, the seller’s agent should disclose that the buyer might be forced to remove the addition. 

Before buying a property for a home-based business, check for zoning. 

If a house has mold, the seller’s agent must disclose it. (Seller, Seller’s Agent, and Buyer’s Agent must disclose.)

 

Agent Inspection

Licensee’s Role Regarding Property Condition 

  • A licensee is not responsible for identifying latent defects. 
  • If the agent is aware of a latent defect, he must disclose it.
  • The agent must disclose what is readily seen.

A Listing agent noticed shingles that were broken on the roof. He should disclose that defect. 

 
 
 
 

Environmental Issues Requiring Disclosure

Lead

Before renting or buying a pre-1978 home or apartment, federal law requires:

Sellers

Sellers must disclose known information on lead-based paint or lead-based paint hazards before selling a house.

Landlords

Landlords must disclose known information on lead-based paint and lead-based paint hazards before leases take effect. Leases must include a specific warning statement about lead-based paint.

Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992

Also known as Title X, to protect families from exposure to lead from paint, dust, and soil.

It directed HUD and EPA to require the disclosure of known information on lead-based paint and lead-based paint hazards before the sale or lease of most housing built before 1978.

Homebuyers and Renters: Know Your Rights Before You Buy or Lease

Many homes and condominiums built before 1978 have lead-based paint. Paint that has chipped or is deteriorating, or on surfaces that rub together such as windows and doors, creates lead dust, which can pose serious health hazards to occupants and visitors. Homebuyers and renters have fundamental rights to know whether lead is present — before signing contracts or leases.

Use of the lead-based paint disclosure for all properties built before 1978 is required by law.

The buyer has the right to have the property inspected for lead within ten days of the effective date of the contract and may terminate the contract if they are unhappy with the findings.

The disclosure allows buyers to waive their right to a lead inspection.

There is no duty to remediate lead.

A seller must keep a record/copy of the disclosure for at least three years from the sale date.

TYPE OF HOUSING NOT COVERED!

  • Housing built after 1977 (Congress chose not to cover post-1977 housing because the CPSC banned using lead-based paint for residential use in 1978).
  • Zero-bedroom units, such as efficiencies, lofts, and dormitories.
  • Leases for less than 100 days, such as vacation houses or short-term rentals.
  • Housing for the elderly (unless children live there).
  • Housing for the handicapped (unless children live there)
  • Rental housing has been inspected by a certified inspector and free of lead-based paint.
  • Foreclosure sales.

In children, exposure to lead can cause:

  • Nervous system and kidney damage
  • Learning disabilities, attention-deficit disorder, and decreased intelligence
  • Speech, language, and behavior problems
  • Poor muscle coordination
  • Decreased muscle and bone growth
  • Hearing damage

While low-lead exposure is most common, exposure to high amounts of lead can have devastating effects on children, including seizures, unconsciousness, and in some cases, death. Although children are especially susceptible to lead exposure, lead can be dangerous for adults, too.

In adults, exposure to lead can cause:

  • Harm to a developing fetus
  • Increased chance of high blood pressure during pregnancy
  • Fertility problems (in men and women)
  • High blood pressure
  • Digestive problems
  • Nerve disorders
  • Memory and concentration problems
  • Muscle and joint pain

Waste Disposal Sites

Landfills or waste disposal sites when improperly constructed, can lead to groundwater contamination.

Know locations, and disclose.

Recommend water testing.

Underground storage tanks (USTs)

Underground Storage Tanks

May contain household heating oil or industrial fuel or chemicals.

Old rusty or leaking containers can cause groundwater contamination. Sometimes found on both commercial and residential properties, these are commonly called UST’s.

Recommend water testing.

Leaking – LUST

Farming herbicides and pesticides

Another source of groundwater contamination.

Recommend water testing.

Asbestos

Asbestos

A fibrous material was once prevalent in many building materials because of its insulating and heat-resistant value. (Now banned in most places for most uses, and subject to strict EPA regulations. Airborne asbestos is called friable.

Radon

A naturally occurring colorless and odorless gas produced by the decay of radioactive materials in rocks under the ground.

Mold

Mold needs water, oxygen, nutrients, and the right temperature to grow.

Newer homes with tighter construction can add to mold growth, hence the addition of ventilating fans in wet areas.

Groundwater Contamination

Happens near groundwater. Leaking tanks/septic systems or mini landfills or pesticides

Brownfields

Land known to be hazardous-most likely a hazardous industrial site.

Wetlands

A link between land and water. •An area where water covers the soil or is present either at or near the soil’s surface all year or for varying periods during the year, including during the growing season.

 
 

Property condition that may warrant inspections and surveys

  • Slipping hill
  • UST
  • wood rot
  • noisy pipes
  • easements
  • encroachments
  • lawsuits
  • Destruction, damage, or material alteration of property
  • Not fit for occupancy
  • Fire
  • Meth house
  • Sinking foundation’
  • Bad electrical
  • Sewer well
  • Plumbing problems
 

Government Controls

  • Freeway addition
  • Zoning Changes
  • Airport Expansion
  • Special assessments
  • New highway in backyard
  • Railroads
 
 
 

Red Flag Issues

A red flag issue is an indication that a property may have a problem that may require a closer inspection. You would like to inspect further.” 

  • Examples would be a brown spot on the ceiling, musty mold smells, or several cracks in a driveway going up or down a hill. 

A professional should inspect all red flags.

 

 
 

More Issues

Blighted

They are considered blighted property when the Secretary of State’s field inspection confirms a complaint that the property is deteriorated or impaired and presents a hazard to public health, safety, or welfare.

Restrictive Covenants  

If restrictive covenants exist for the property being sold, the purchasers must be presented with a copy before the buyer signs the purchase contract.

Pest Infestation 

An agent is responsible for looking for animal feces, strange odors, dead bugs, and anything that will indicate an infestation. The findings may create a red flag issue. In that case, a professional should be called to investigate.

Structural issues 

such as roof, gutters, downspouts, doors, windows, and foundation – Disclose anything you find may constitute a material fact.

Zoning and Planning Information 

There are zoning maps available. It is the duty of the agent to investigate the zoning of a property.

Boundaries of School/Utility/Taxation Districts, Flight paths

 Disclose everything. Section 16 of every township is set aside for schools. Disclose any special assessments added to the tax base.

Encroachments 

must be disclosed. Hire a professional to survey the property or look toward public records for the measurement.

Local Taxes and Special Assessments, Other Liens 

neighborhoods in the same city may have different tax amounts due to special assessments.

A special assessment 

is an added tax to the property owner. An example of a special assessment would be if a school district needed a new school; the city would build it and then tax the district’s homes with a special assessment. Only the people who benefit from an improvement will pay special assessments.

Megan’s Law

A federal law requiring residence registration of convicted sexual predators, in effect creating a stigmatized property. Real Estate licensees should direct buyers/tenants to the source of such registration lists instead of providing the information personally.

Stigmatized Property

What do you do?

  • Properties that have been the scenes of murders, suicides, or are alleged to be haunted, are stigmatized. 
  • When in doubt, licensees should make full disclosure.
 
 
 
 

Property Condition Disclosure Statement

 Property Condition Disclosure Statement (PCDS)

A document required by law that reveals specific information. Must be filled out by the Seller.

Property Owner’s Role Regarding Property Condition

  • The Seller will provide the buyer with a written property condition disclosure. 
  • The Seller must identify all material facts relating to the property and its surrounding area.
  • The seller must identify latent defects if aware of the defect.

Full seller disclosure

 Sellers must disclose everything even if not asked. 

 
 

Mississippi’s Property Condition Disclosure Forms (PCDS)

Highlights

A TRANSFEROR/SELLER of real property consisting of not less than one (1) nor more than four (4) dwelling units shall provide a Property Condition Disclosure Statement when the transfer is by, or with the aid of, a duly licensed real estate broker or salesperson.

The PCDS shall not be considered as a warranty by the Transferor/Seller.

**The PCDS is for “disclosure” purposes only and should NOT be included or become a part of any contract between the Transferor/Seller and the Transferee/Buyer.

**The PCDS may not be used as a substitute for a home inspection by a Mississippi Licensed Home Inspector or for the issuance of any Home Warranty Policy that the Transferor/Seller or Transferee/Buyer may obtain.

**The purchase or sale of any Appliances or items considered Personal Property should be negotiated by the Parties as part of the Contract of Sale and the ownership interest(s) should be transferred by a Bill of Sale.

A known (material) defect is a condition found within the property that was known by the Transferor/Seller at the time of the listing or was discovered prior to a transaction being finalized and the defect results in one of the following:

(a) The defect has an adverse effect on the market value or marketability of the residence.

(b) The defect significantly impairs the health or safety of future occupants of the residence.

(c) If not repaired/removed/replaced, the defect shortens the expected normal life of the residence

Buyer’s Agent was told a property had no defects. Upon his inspection, he found several problems. 

  1. The agent should disclose the defects to his buyer.

When an inspector asks if he can remove a drywall piece from the basement wall, he is looking for a latent defect.