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Skeletons in the Closet, Part II

Is a seller obligated to disclose a property’s hidden past?

November 17, 2011
Josh Jerman R(B) - Real Estate Columnist , The Wailea Group LLC

In my last column, I discussed the disclosure of "material facts" in real estate transactions.

Sellers know a property could be stigmatized if an unpleasant situation occurred there; however, if a seller or Realtor has knowledge of any kind of fact, defect, or condition, past or present, (including paranormal activity or certain types of death, the topic of the previous column) that would be expected to measurably affect the value of the property to a reasonable person, he or she must disclose it to the buyer. This is not just a polite gesture, or a matter of conscience-it is a legal requirement.

According to Chapter 508D of the Hawai'i Revised Statutes ("Mandatory Seller Disclosures in Real Estate Transactions"), sellers of residential properties must disclose all "material facts" to buyers. Aside from an "open and notorious" crime or death occurring on a property for sale, if a seller or Realtor has knowledge of other material facts that could affect the desirability of a property, he or she should disclose these potential "dirty little secrets." But there are some exceptions.

Without question, criminal activity in a neighborhood (violent crime, drug raids, etc.) can impact a buyer's decision. However, sellers do not typically disclose hearsay, such as neighbors suspecting there is a drug operation in the house down the street. But obvious and consistent nuisances, such as noise or excessive late night traffic, that often go hand-in-hand with a drug operation, should be disclosed. If there is a domestic violence situation, a seller will not typically label it as such, but will inform the buyer that noise or yelling is often heard in the neighborhood. Similarly, for a neighbor to be labeled as a drug dealer, a criminal conviction would usually be necessary to warrant disclosure.

As a seller, comprehensive disclosure should be viewed as a good thing because it helps to protect against future liability, as well as allows a buyer to make an informed decision. Would you like to know more about other particular circumstances that require disclosure? How about the ones that don't warrant disclosure? Just email me your questions at Josh@JoshJerman.com.

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Josh Jerman is an award-winning, top-producing REALTOR/Broker with The Wailea Group LLC, located in The Shops at Wailea. He serves on the Realtors Association of Maui (RAM) Board of Directors, RAM Education Committee and the Hawai'i Association of Realtors' Finance Committee. To "Ask Josh," send your questions to Josh@JoshJerman.com or visit www.facebook.com/askjosh.

 
 
 

 

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