Real Estate is a very local kind of business. Local laws and customs dictate how things are done. I am going to discuss seller disclosure issues, but only in a general sense. What must be done in your community depends on state law, and perhaps local practice and custom. Your lawyer will have to provide you with specific answers.
Will I have to disclose this [something bad] if I sell the property? Every lawyer that does real estate closings is asked this question? While disclosing everything is needless and silly, if it is latent, hidden, not readily observable, you should give careful thought to disclosing it. In fact, the law may require that you do so.
What issues generate disclosure questions? The list has no limit, but here are some common triggers: old, abandoned septic and oil tanks; old wells; contamination that once existed but was cleaned; contamination nearby, but not on site; nearby crimes; factories that pollute and are in the general neighborhood; low aircraft traffic; train and other noises.
What needs to be disclosed is a function of local law and local custom. The law in this area is always evolving, and in general, the the trend seems to me to be one that promotes more and more disclosure. For my clients I always caution that if there is any doubt, they should disclose.
In some communities the doctrine of "caveat emptor" may not require disclosure of everything. That is an old doctrine that means "let the buyer beware." But even where this is still the law, it often does not apply to hidden defects. For example, a buried underground tank that was not removed may have to be disclosed because even with due diligence a buyer may not be able to learn about the tank before closing.
Often, even when caveat emptor applies, a seller may still be liable if he or she spoke about site conditions, but failed to give the entire picture. If a seller speaks at all about site conditions, he or she better paint a very complete, full and accurate picture.
Many contracts provide that a seller makes no representations. However in some states, verbal statements by a seller can create liability if they are not completely honest statements, even when such language exists in the contract.
Failing to disclose what ought to be disclosed may result in a lawsuit, and often in fact does. A buyer may allege fraud, misrepresentation and perhaps breach of contr act. In certain cases, a jury may award punitive damages, typically high dollar awards designed to punish the wrongdoer.
Disclosure issues are locally based, what must be disclosed in one place may differ in another. Which means that local professionals should be consulted. The key is for everyone to be real careful. Disclosure lawsuits are not uncommon. And buyers hate surprises.
It's funny. If you do not disclose you may sell a home at a higher price. But when you are sued four years later, you will regret not having disclosed and legal fees will likely exceed the small amount of extra money that you were paid because you did not disclose. Disclosure never creates problems that do not otherwise exist, and it avoids lawsuits. I am a fan of full disclosure.