- The Washington Times - Wednesday, July 19, 2006

It is every home buyer’s nightmare: That unanticipated and costly something that shows up long after the deal is done and the books are closed. Termites. Radon. Asbestos. A leaky roof.

These are all buyer headaches — just the kinds of things that call down strings of invective, and sometimes legal action, upon the seller.

“People should know what they are getting into,” says Barry Levy, a salesman with the Levy Team in the District. “And no one wants to end up with a lawsuit.”

But doesn’t the old adage “caveat emptor” — buyer beware — still hold true in home buying?

Yes and no. Buyers should always be savvy, wherever and whatever they buy. A home inspection by a licensed professional is always a good idea.

But exactly how savvy a homeowner needs to be can depend upon a number of factors, including location, your broker, and the age of the house you wish to purchase.

The old saw about the wary buyer has been evolving recently as courts and state legislatures have imposed certain disclosure requirements to protect consumers.

The presence of radon, for example, can be life-threatening. Based on new reports from the National Academy of Sciences, the Environmental Protection Agency now estimates that 21,000 Americans die of radon-induced lung cancer every year. The American Association of Radon Scientists and Technologists (AARST) estimate 10 million homes and 38 million Americans are at risk from dangerous radon exposure.

To ensure that consumers are aware of these and other issues, an increasing number of states require sellers to fill out a disclosure form that lists current problems and issues with the property.

What’s in a disclosure form? Important information about water and sewer systems, heating and air conditioning, structural defects and, yes, termites and a leaky roof.

Generally, disclosures are offered at the time of contract.

According to the most recent National Association of Realtors Profile of Homebuyers and Sellers, six out of 10 buyers reported that their agent asked them to sign some sort of disclosure agreement.

But in the greater Washington area, the presence of such an agreement may well be determined by the location of the house.

Sellers in the District of Columbia have to disclose, while those in Maryland can disclose or disclaim. In Virginia, which once held completely to the buyer beware concept, sellers can choose between a disclosure and disclaimer form, which essentially says that the seller makes no representations about any particular aspect of the property.

Of course, just because a seller discloses a problem or defect doesn’t mean that he or she has to repair it. But you can’t just disclose some problems and not others.

And it pays for sellers to be honest about defects, says Mr. Levy, who notes that full disclosure “almost never” impacts a sale.

But even a seemingly full disclosure might miss something.

“Most people are reasonably honest,” Mr. Levy says. “They may forget something, or the inspector may have missed something.”

Moreover, honest disclosure can often help a sale go through, Mr. Levy says.

“If the buyer has information, it helps them get comfortable enough to go ahead,” he says.

In a seller’s market, buyers need to be especially careful, since they are more likely to dispense with some important considerations, like home inspections, in order to get the winning bid.

“Regular home inspections are key,” says the Rev. Grace Caputo, also in sales with the Levy Team. “Things like radon and asbestos are not difficult to detect; I would certainly want to know if these things were there.”

Recent additions to disclosure laws in all three local jurisdictions stipulate additional disclosures in certain situations.

In Maryland, a law effective October 2005 amends a provision of the Maryland Real Estate Code to stipulate that the seller must advise buyers of “latent defects,” or those that would not be seen in a casual inspection that would pose a “direct threat” to the health or safety of the occupant.

While such defects are not enumerated in the code, one could assume that they would include such issues as termites, structural damage, hidden mold and mildew, or certain kinds of electrical problems.

Of course, the code assumes that the seller has knowledge of these issues. These “latent defects” must be disclosed even if the seller has disclaimed everything else.

There are exemptions to the disclosure requirement. In Maryland, sellers of new homes that have never been occupied or for which a certificate of occupancy has been issued within one year before a sales contract is entered into do not have to provide disclosure information.

The same holds true if the property under consideration is an estate.

Meanwhile, sellers in the District of Columbia are also expected to disclose the landmark status of the property, the historic status of the neighborhood, whether the property had been cited for a violation during the time it was owned by the seller, and whether the property is subject to a conservation easement.

Exemptions to disclosure in the District include court-ordered transfers, transfers made on behalf of an estate, if the seller is not occupying the property, and transfers warranted under divorce decrees or property settlements.

In Virginia, where disclaimers are still used more frequently than disclosures, sellers as of this month will have to inform buyers if the house is located in a historic district or Resource Protection Area. Sellers will also have to disclose if there is a pending building action against the property.

“If you move into a historic district, there may limitations on paint colors or door types,” says Mary Beth Coya, vice president of public and governmental affairs at the Northern Virginia Association of Realtors. “And if you move into a Resource Protection Area you may be prevented from building a shed or a deck.”

Since residency in these areas affects the evolution of your home, such things should be disclosed, Ms. Coya says. But no disclosures of any type should completely remove the burden of responsibility from the buyer.

“We still expect the buyer to exercise due diligence,” says Ms. Coya, who notes that sellers may not always be aware of everything. “The disclosures can point you to what you will need to research. Different localities are in different phases as to how they are mapped.”

Other important disclosures include information about the proximity of the home to such noise-producing locations as airports or factories. Recently, legislation in Maryland provided for new homeowners to be made aware of the presence of military bases in the area that conduct specified military maneuvers or testing.

Why disclaim instead of disclose? Filing a disclaimer essentially relieves sellers of particular repair burdens and the responsibility for overlooking something in the disclosure process.

And disclaimers can also face some hidden issues.

“A rational buyer often perceives the seller who chooses to disclaim as dishonest,” Mr. Levy says. “People often see the seller as trying to ‘get away’ with something.”

Federal law also mandates that certain things, like the presence of lead-based paint, must be disclosed regardless of jurisdiction.

In the meantime, the Real Estate Settlement Procedures Act, or RESPA, requires periodic disclosures about mortgage and closing costs (www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm).

Your agent or broker should also be prepared to disclose for whom he or she is working. The National Association of Realtors’ Code of Ethics requires agents to disclose this information, although the timing of the disclosure differs by jurisdiction. Yet, according to 2005 research by NAR, just 30 percent of buyers received disclosures from their agents at the first meeting.

Why is agent disclosure important? Because buyers and sellers frequently divulge to agents just the kind of data that can affect a sale, such as information about personal finances or plans for a specific bargaining ploy.

Brokers and agents are also required to disclose material defects, even if they represent the seller. A good broker will always admit the limitations of their own expertise when it comes to the possibility of a home defect.

“There are often things that I can’t pick up,” says Mr. Levy, whose work in Maryland and the District frequently takes him into older homes.

Older homes, no matter how well built, nearly always have defects. Many of the homes built by Harry Wardman in the 1920s, for example, are known for what Mr. Levy calls the “famous Wardman falling bathrooms.” He should know. He is the proud owner of a Harry Wardman home, built in 1924.

“Of the 41/2 original bathrooms in the house, only one was falling,” says Mr. Levy, who notes that Wardman homes are so well built that the bathroom defect was not perceptible to the naked eye. He said he had to shore up the floor with steel supports.

The knowledge of the falling bathroom didn’t dissuade him from purchasing the house.

In the end, real estate professionals say, full disclosure is always the best way to go.

“Honesty is the best policy,” Mr. Levy says. “It’s good business, and it’s morally right.”

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