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What Buyers Need to Know and What Sellers Need to Tell About Real Property

To disclose or not to disclose.


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While it’s smart to do your homework for every major purchase, buying property comes with some legal guidelines that buyers and sellers should know.

 

State law says that disclosures provide key information, such as a history of the home, all in one handy document that will help you decide whether or not to move forward with the sale. And then when it comes time to sell, you may end up wondering where to draw the line on sharing that history. What must be disclosed, and what might be too much?

 

The seller’s real property disclosures are required for all residential sales, and state law requires that all material facts are disclosed. A material fact is any fact, defect or condition, past or present, that would be expected to measurably affect the value of the property to a reasonable person. Material facts are things the seller has knowledge and control of, things that can be observed from visible and accessible areas, and sometimes things that have happened on the property.

 

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Old Hawai‘i House

Photo: Yvonne Stewart

 

An agent recently told us about a 142-page disclosure document from hell. The homeowner who wrote it was, unsurprisingly, an attorney. And a smart seller. Sure, a big scary disclosure document full of attachments and records is an intimidating read and might scare a buyer off, but as a seller, it’s better to disclose now than be sued later for something that you didn’t think was material.

 

Sensitive issues include deaths on the property. While it’s not required that a natural death be disclosed, most people include it. A violent death should always be disclosed. More is more. Think of it this way: Your buyer meets the neighbors and the first thing the neighbors are going to do is tell the new owners everything they know about their new home. You want to make sure there are no surprises.

 

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A Maui lawsuit arose when a homeowner realized their new neighborhood was known for ghostly encounters and that iwi (bones) were relocated and interred in certain areas throughout the subdivision. They sued the seller, and the seller was able to show that they had disclosed the presence of the iwi, as well as the well-known and very publicly discussed neighborhood ghost stories. The buyers lost the suit and the sellers were protected because they shared all they knew.

 

Disclosures aren’t required for sales to a co-owner; spouse, parent or child; sale by bequest in a will, inheritance by legal heirs or court order; foreclosures; sale by a lessor or lessee when land converts; or first sale of a new property or of condos that are sold with a current public report. We say, when in doubt, disclose. But maybe not 142 pages worth.

 

For full disclosure laws see Hawai‘i Revised Statutes 508D.

 

Read more stories by Rachel Ross Bradley

 

 

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