Chapter 38 - Disclosures & Stigmatized Properties
Seller's Disclosure: Statement Contents
The statute lists several items about the physical condition of the property and the types of latent conditions that must be disclosed. Contents of Seller's Disclosure Statement - Water and sewer systems, including the source of household water, water treatment systems, and sprinkler systems. - Insulation. - Structural systems, including the roof, walls, floors, foundation, and any basement. - Plumbing, electrical, heating, and air-conditioning systems. - History of infestation by rodents or wood-boring insects, if any. - Appliances. - Alarm system and intercom system. - Garage door opener and remote control. Fixtures. - Any other information required by the Mayor. - The disclosure form has space for the seller to add comments when a simple "yes" or "no" does not tell the whole story. - Obviously, many buyers will have a home inspection performed by an independent home inspection company as part of the contract of sale with a contingency clause allowing them to cancel the contract based on the results of the inspection. The form also includes questions about any non-defect issues such as zoning violations, unrecorded easements, or homeowners' association restrictions. Sellers also must disclose if the property is located in a flood zone, conservation area, or historic area. This is important because it could limit potential renovations. Sellers must disclose any knowledge they have of: - Exterior Drainage - Damage to Property - Wood-Destroying Insects or Rodents - Substances, materials, or environmental hazards affecting the property, including but not limited to contaminated soil, radon gas, asbestos, lead-based paint, underground storage tanks, or other contaminants - Excluding utilities, any known zoning violations, nonconforming uses, building restriction violations or setback requirements, or any recorded or unrecorded easement on or affecting the residence - Knowledge of property being a DC landmark, which includes being located in a designated historic district or designated as an historic property - Citations for a violation of any historic preservation law or regulation - Facade or conservation easement on the property
Ghosts
There have been many lawsuits over the non-disclosure of ghosts and even a lawsuit over the disclosure of ghosts that promptly left when the new buyer moved in because the buyer wanted the ghosts. Case Study: In 1989, Jeffrey Stambovsky put $32,500 down on the Victorian mansion. He used the services of a local real estate broker to assist him in the transaction. When an architect refused to work on the house, saying it was haunted, Stambovsky discovered the seller, Helen Ackley, had described the home's ghosts in a Reader's Digest article years before. The ghosts, described as cheerful, entertaining, and dressed in Revolutionary War-era clothing, also were mentioned in other, later articles. Stambovsky sued, demanding return of his deposit. The New York Supreme Court ruled that because Ackley had put her ghost story in print, "as a matter of law, the house was haunted." The court forced Ackley to take back the house for non-disclosure of the ghosts. Although Washington DC has no statutes requiring disclosure of ghosts, an argument could certainly be made that in this particular case, a wise broker would encourage the seller to disclose the "cheerful ghosts." However, in Charleston, SC, haunted houses are said to sell at a premium. [Stambovsky v. Ackley New York].
List three areas where asbestos can be found in older buildings.
Thermal insulation on boilers, ductwork, pipes, acoustical ceiling tile, popcorn ceilings, and siding.
Instructions to the Seller for Seller's Disclosure Statement
These Instructions are to assist the Seller in completing the required Seller's Disclosure Statement in order to comply with the District of Columbia Residential Real Property Seller Disclosure Act. [DCMR 2708.13]. 1. Who must complete the Seller's Disclosure Statement? The Seller, not the broker and not the management company, condominium association, cooperative association or homeowner's association. 2. In what types of transactions must the Seller provide the Seller's Disclosure Statement to the Purchaser? The Act applies to the following types of transfers or sales of District of Columbia real estate: - where the property consists of one to four residential dwelling units, and, - the transactions a sale, exchange, installment land contract, lease with an option to purchase, or any other option to - purchase, and, - the purchaser expresses, in writing, an interest to reside in the property to be transferred. However, the Act does not apply to: - court ordered transfers. - transfers to a mortgagee by a mortgagor in default. - transfers by sale under a power of sale in a deed of trust or mortgage or any foreclosure sale under a decree of foreclosure or deed in lieu of foreclosures. - transfers by a non-occupant fiduciary administering a decedent's estate, guardianship, conservatorship or trust. - transfers between co-tenants. - transfers made to the transferor's spouse, parent, grandparent, child, grandchild or sibling (or any combinations of the foregoing). - transfer between spouses under a divorce judgment incidental to such a judgment. - transfers or exchanges to or from any governmental entity; and - transfers made by a person of newly constructed residential property that has not been inhabited. 3. When does the Seller's Disclosure Statement have to be provided to the Purchaser? In a sale, before or at the time the prospective transferee executes a purchase agreement with the transferor. In an installment sales contract (where a binding purchase contract has not been executed), or in the case of a lease with no option to purchase, before or at the time the prospective transferee executes the installment sales contract or lease with the transferor. 4. What information must the Seller disclose? Answer ALL questions on the Seller's Disclosure Statement. If some items do not apply to your property, check "N/A" (not applicable). If you do not know the facts, check "UNKNOWN." Report actually known conditions referred to in the questions. Each disclosure must be made in "good faith" (honesty in fact in the making of the disclosure). Attach additional pages with your signature if additional space is required. The Seller of a condominium unit, cooperative unit, or a lot in a homeowners association, is to provide information only as to the Seller's unit or lot, and not as to any common elements, common areas or other areas outside of the unit or lot. 5. What is the remedy if the Seller does not provide the Seller's Disclosure Statement to the Transferee? If the Seller's Disclosure Statement is delivered after the purchaser executes the purchase agreement, installment sales contract or lease with an option to purchase, the purchaser may terminate the transaction by written notice to the seller not more than five (5) calendar days after receipt of the Seller's Disclosure Statement by the purchaser, and the deposit must be returned to the purchaser. The right to terminate is waived if not exercised before the earliest of: - the making of an application for a mortgage loan (if the lender discloses that the right to rescind terminates on submission of the application); or - settlement or date of occupancy in the case of a sale; or - occupancy in the case of a lease with an option to purchase. 6. If the Seller finds out different information after providing the Seller's Disclosure Statement to the Purchaser, how does this impact a ratified contract? If information becomes inaccurate after delivery of the disclosure form, the inaccuracy shall not be grounds for terminating the transaction. 7. How must a Seller deliver the Seller's Disclosure Statement to the Transferee? The Seller's Disclosure Statement must be delivered by personal delivery, facsimile delivery, or by registered mail to the transferee. Execution by the transferor of a facsimile is considered execution of the original.
What is the purpose of making disclosures in real estate transactions?
To ensure that all parties involved in the real estate transaction have sufficient information to make informed decisions.
Several hazardous substances, materials, or products might be found on a property that can affect its use. Which is NOT a common substance?
Toxic waste sites
List four items about the physical condition of the property that must be disclosed.
Water and sewer systems, including the source of household water, water treatment systems, and sprinkler systems. Insulation. Structural systems, including the roof, walls, floors, foundation, and any basement. Plumbing, electrical, heating, and air-conditioning systems. History of infestation by rodents or wood-boring insects, if any. Appliances. Alarm system and intercom system. Garage door opener and remote control. Fixtures.
Volatile organic compounds (VOCs)
are carbon-containing compounds that evaporate at room temperature. They are found in many housekeeping, maintenance, and building products that are made of organic (carbon-based) chemicals. Sources of VOCs include aerosol sprays, air fresheners, automotive products, cleansers and disinfectants, dry-cleaned clothing, formaldehyde, glues, paint, paint strippers, solvents, stored fuels, and wood preservatives. Because of the airtight construction of modern homes, the concentration of VOCs within a home can be as much as 10 times higher than that in the outside air. Some of these VOCs can be quite harmful to humans.
Environmental hazards
are introduced into the indoor environment through air, water, and contact with materials because of painting, installation of carpets, and cleaning supplies, among other things. Chemicals may be vapors, gases, liquids, or particulates. Numerous federal, state, and local laws have been enacted to address the problems created by environmental hazards. Although land contamination is often the environmental concern that receives the most attention in real estate transactions, several hazardous substances, materials, or products might be found on a property that can affect its use. Common substances include lead-based paint (discussed earlier), asbestos, mold, radon, volatile organic compounds. Less common is the contamination of property by waste sites, underground storage tanks, and overhead power lines. Part of the licensee's job is to be aware of the condition of the property or properties he or she has for sale or is showing to potential buyers. This is part of standard of due diligence. It is also a professional responsibility, as well as a courtesy the licensee owes to the public. Therefore, it is also up to the licensee to be aware if a property has any environmental problems. If this is so, the licensee has the proactive responsibility to disclose these fully and up front.
Statutory disclosures
are those that are required by statute or law. Sometimes the sellers will need to fill out and sign forms; other times the sellers (or broker) give the buyers notices or informational booklets. Additionally, there are optional disclosures and reports that the buyers or lender may require. Delivery of these statutory disclosures is important because the buyers can cancel the purchase agreement if the sellers have not delivered the disclosures within the time specified in the agreement.
stigmatized property,
as defined by NAR, is "a property that has been psychologically impacted by an event which occurred, or was suspected to have occurred, on the property, such event being one that has no physical impact of any kind". Although some might call a haunted house stigmatized, the most common stigmatized properties are ones in which murders, suicides, criminal activity, or gang activity have occurred. Common Types of Stigmas - Ghosts - Group homes in the neighborhood - Homes built with defective products - Registered sex offenders in the neighborhood - Death on the property - Previous occupant with AIDS, HIV related illnesses, or HIV infection - Anything unusual that would deter the buyer from buying if the buyer were aware of that situation
Waste sites
can diminish the value of property simply because of their proximity to residential real estate. A hazardous waste is any solid, liquid, or gas that can cause illness or death to people or other living organisms or can cause some other harm to property or the environment when mismanaged or released into the environment. Waste sites are surrounded by a barrier that prevents toxic material from leaching into surrounding soils. Hazardous waste that is not properly managed may escape into the environment and contaminate the soil, surface, and ground water, or pollute the air. If such materials spread onto other sites, the owner of the material (or the party storing the material) can be found guilty of trespass. If harm befalls a person because of the leaked hazardous waste, this trespass can be ruled battery. Criminal charges can be brought against the owner, tenant, or operator of the hazardous site. Waste sites and their contents are regulated by a variety of federal, state, regional, and local agencies and laws. The most prominent laws regulating waste sites are CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act of 1980) and SARA (Superfund Amendments and Reauthorization Act of 1986). The Toxic Substances Control Act (TSCA) lists the chemicals that some waste sites contain and regulates their delivery and storage. Many chemicals that are listed by the TSCA are not hazardous when used properly, but many more are. Hazardous Chemicals - Polychlorinated Biphenyls (PCBs) - Formaldehyde - Chlorofluorocarbons (CFCs) These substances are regulated and monitored cradle-to-grave. PCBs are used in some paints, fluorescent light bulbs, and a variety of other applications. PCBs are known carcinogens. Formaldehyde is common and is used for disinfecting and embalming. Like PCBs, formaldehyde is a carcinogen. CFCs are used in some paints, air conditioners, and adhesives. They are a possible cause of the destruction of the ozone layer and a possible contributor to global warming.
Megan's Law
is a federal law that was passed to prevent crimes against children. Megan's Law is the name for a federal law, and informal name for subsequent state laws. DC Code §22-4001(8) declares that sex offenders present a high risk to commit repeat offenses; therefore, sex offenders are required to register with local law enforcement agencies on the sex offense registry. Because the registry provides information readily available to the public, the contract of sale used in the sale of residential real estate in the District advises buyers to check the Sex Offender Registry. Neither the seller and/or the brokers have a duty to disclose whether registered sex offenders are living in the neighborhood because it is a nonmaterial defect that does not involve the seller's property. However, if buyers are concerned about sex offenders living in close proximity to a home they are considering purchasing, you should tell them to go the DC Sex Offender website.
Polybutylene
is a form of plastic resin that was used extensively in the manufacture of water supply piping from 1978 until 1995. This piping was used for underground water mains and for interior water distribution. Experts estimate that polybutylene piping is still present in millions of homes. Unfortunately, studies show that over time polybutylene pipes deteriorate and leak causing extensive damage to property. Because the deterioration occurs from the inside out, it is difficult to assess the extent of the damage. Many people believe that it is not a question of if the pipes will fail but when they will fail. There is not much scientific research that proves conclusively why the polybutylene pipes failed, but it is generally accepted that oxidants in the public water supplies, such as chlorine, cause pipes and pipe connectors to degrade which leads to fractured and leaking pipes. Therefore, the system becomes weak, fails without warning, costing homeowners thousands of dollars in repairs. Because there is no warning if or when the pipes will leak, some buyers have a licensed plumber determine the type of piping in the property and will not buy a home with polybutylene pipes.
Mold
is a fungus that reproduces by means of tiny spores. Mold contamination generally arises in buildings that have been poorly constructed or lack adequate ventilation. Different types of mold may breed in the air circulation systems and walls of a structure. Mold may begin growing indoors when mold spores land on wet surfaces. There are many types of mold, and none of them will grow without water or moisture. Molds themselves are not toxic or poisonous. However, certain molds are toxigenic because they can produce toxins, called mycotoxins. There have been a number of recent lawsuits against sellers concerning mold in dwellings sold. A seller should therefore tell a buyer that mold is a part of the natural environment that, when accumulated in sufficient quantities, may present health risks to susceptible persons. Buyers who are concerned about the possible presence of harmful mold on the premises may want to have a mold inspection as part of the sale contract. Mold Inspection - The buyer will pay for a professional mold inspection. - The buyer has a specified number of days to complete the inspection. - The buyer will restore the property after the inspection. - The buyer may cancel the contract if the inspection reveals mold presence and removal of the mold will exceed a specified amount. The presence of surface molds can be confused with wood decaying fungi. Although mold organisms may discolor the wood, they do not break down wood fibers and thus do not weaken its structure. However, these organisms could indicate a moisture level in the wood high enough to also support the growth of wood-decaying fungi. Wood-decaying fungus (fungi, plural) causes more damage to structures than all the fires, floods, and termites combined!
Radon
is a naturally occurring colorless, tasteless, and odorless radioactive gas that comes from the decay of uranium found in nearly all soils, but typically from granite and shale. Long-term exposure to elevated levels of radon can increase the risk of developing lung cancer. Radon enters buildings from the ground through cracks and openings in concrete slabs, crawl spaces, floor drains, sumps, and the many tiny pores in hollow-wall concrete blocks. Once inside a building, radon can become trapped. Unless the building is properly ventilated to remove it, the gas can become a health hazard. Building materials are not a significant source of radon except where they incorporate rocks rich in radium or uranium such as granite and shale. Radon levels vary throughout the country, as does the amount of radon entering buildings. Generally, the area in a building closest to the soil surface has the highest level of radon. Upper stories have lower levels of radon. Consequently, radon is rarely a concern in high-rise apartment and office buildings, other than at ground level. The U.S. Environmental Protection Agency (EPA) and the Surgeon General of the United States have recommended that all houses should be tested for radon. Since radon accumulates in buildings, it can be detected by using a spectrometer. Notification of the hazard is sufficient. Actual radon testing is not required before a sale. A buyer who decides to test for radon may do so before signing the contract, or after signing it, as long as the contract states the sale of the home depends on the buyer's satisfaction with the results of the test
Asbestos
is a naturally occurring mineral that had numerous industrial uses insulating heating pipes and HVAC systems. Asbestos is a carcinogen known to cause cancer. Painted or taped over asbestos is not harmful unless it becomes damaged and friable. Friable means the material can be easily crushed to a powder by hand pressure and release fibers. Asbestos fibers that are released into the air and inhaled can accumulate in the lungs and cause lung cancer or mesothelioma (cancer of the lining of the chest or abdomen). There is no safe level of asbestos exposure. The more asbestos fibers inhaled, the greater the risk of developing lung cancer and asbestos-related diseases. Exposure to asbestos should always be avoided. Due to its friable nature, the removal of asbestos requires education and training. Although it tends to be more problematic in commercial and industrial buildings, asbestos issues also may arise in older residential properties. In the past, certain unique physical properties of asbestos made it highly desirable for use in a wide range of applications in residential construction. Many older buildings (pre 1980) have asbestos in the acoustical and thermal insulation on boilers, ductwork, and pipes. Asbestos was also used in fireproofing and siding. Asbestos that has been sprayed on ceilings often has a spongy, "cottage cheese" or "popcorn" appearance with irregular soft surfaces. Popcorn ceilings were very popular from the late 50s to early 80s and usually contained asbestos. Asbestos troweled on walls has a textured, firm appearance. Vermiculite attic insulation, found both in the attic between trusses and in between walls, also has the potential to contain asbestos. Vermiculite attic insulation is a pebble-like, pour-in product and is usually light-brown or gold in color. Example. A typical home built in the 1940s or 1950s may have rigid asbestos siding on the exterior of the house; asbestos shingles on the roof; vinyl-asbestos flooring throughout the interior of the house; asbestos acoustic tiles on the ceilings; asbestos insulation at all wiring connections where heat is generated, such as near toasters, irons, stoves, and ovens; asbestos flue pipes to discharge flue gases from furnaces and water heaters; and asbestos thermal insulation wrapped around steam heat piping and boilers. Common Building Materials That May Contain Asbestos - Vinyl flooring - Duct wrapping on heating and air conditioning systems - Insulation on hot water pipes and boilers - Some roofing shingles, and siding - Vermiculite attic insulation - Ceiling and wall insulation - Electrical wiring insulation - Sheet rock taping compounds and some ceiling materials Even though asbestos is no longer used in new construction, it is still out there in older buildings. Many buildings with the presence of asbestos are abandoned due to the cost of asbestos remediation. Non-friable asbestos containing material can be removed from a single-family residence by a licensed asbestos contractor, a non-licensed contractor, or the homeowner. However, if the ACM will be made friable or is already friable (materials that can be crumbled, pulverized, or reduced to powder by hand pressure) then a licensed asbestos contractor should remove it.
group home (also known as a community home or family home)
is a residential home that provides services (food, shelter, care, rehabilitation, supervision) to people with disabilities who reside at the home. A group home cannot have more than six people with disabilities and two supervisors living in the home at the same time. Within a community, a group home cannot be located closer than one-half mile of an existing group home. Since a disability is a protected class under fair housing laws and a group home is a permitted residential use, sellers and licensees should not discuss the existence of group homes in the neighborhood.
underground storage tank (UST)
is a tank that has at least 10% of its volume below grade. External issues can be on-site (e.g., a UST in the basement of a house or in the backyard) or off-site (a leaking UST next door or a nearby waste site that is contaminating the subject site). Again, even if the contamination is merely suspected it can create a value-affecting stigma. A leaking UST is known as a LUST. A compilation of LUSTs (typically kept by fire marshals and local police) is known as a LUST list. A LUST can be a problem depending on its contents and the amount it leaks. Outward symptoms of a LUST include dead or dying vegetation or signs of chemicals (including liquid or gaseous phases) oozing from the ground. Toxic materials contained in the LUST may be on the TSCA list, which involves federal laws.
"caveat emptor"
meaning "let the buyer beware" put the buyer on notice to examine the property and buy it at his or her own risk. Now, consumer protection laws require sellers and real estate licensees to provide buyers with various notices and disclosures regarding the real estate transaction.
Wood-decaying fungus
requires four fundamentals to survive which are oxygen, favorable temperatures, water, and food. Unable to manufacture its own food, the wood-decaying fungus feeds off the cells in the wood. The fungus secretes enzymes that break down the wood into usable food, which significantly reduces the strength of the wood, if the condition continues over a period of time.
What does the Latin phrase "caveat emptor" mean?
"Let the buyer beware."
How long do homebuyers have to conduct a paint inspection or risk assessment for lead-based paint or lead-based paint hazards?
10 days
List four systems that a home inspector looks at in a standard home inspection report.
A home inspector will look at the condition of the home's HVAC system, interior plumbing and electrical systems, roof, attic and visible insulation, walls, ceilings, floors, windows and doors, foundation, basement, and structural components.
What is a property that has been psychologically impacted?
A stigmatized property.
Smoke alarms.
All existing residential buildings that contain sleeping units must have a smoke alarm installed in every room used for sleeping purposes, on the wall or ceiling of each separate sleeping area in the immediate vicinity of bedrooms, and one on each story within a dwelling unit including basements and habitable attics. In new buildings, all the alarms have to be hardwired with battery backup. If more than one smoke alarm is required to be installed within a dwelling unit, they have to be interconnected so that if one goes off, they all go off.
Lead Hazards: Lead Warning Statement
All homebuyers (renters) seeking to purchase (or rent) a home that was built prior to 1978 should be given the one-page "Lead Warning Statement", by the seller (landlord) or their representative (agent). The purpose of the document is for the new owner (renter) to acknowledge that lead may exist on the property. The agent must initial this form to indicate that he or she has informed the seller of his or her obligations. The seller (landlord) must comply with the law. However, the agent is not responsible if the seller (landlord) conceals information or fails to disclose information.
Seller's Disclosure: Agent's Responsibility
Although real estate licensees do NOT complete the Seller's Disclosure Statement, they need to inform sellers of their obligation to complete the form and provide it to potential buyers. The seller's agent has certain responsibilities to ensure that the form is completed and provided to potential buyers. Real estate licensees who inform sellers and buyers of their respective obligations and rights regarding a Seller's Disclosure Statement have fulfilled their duty and will not be held liable if there is a violation of the disclosure requirement.
To Whom to Make Disclosures
Any disclosure is ineffective unless it is delivered to the appropriate party. Some disclosure forms incorporate a signature line for the recipient; whereas, others only require the recipient's initials. Once signed and dated, this acknowledgment is evidence the disclosure was made and delivered. Typically, delivery of a written disclosure to a party's agent is delivery to that party. So, unless a statute requires delivery only to a specific person, delivery to the party's agent is legally sufficient delivery.
When must the Seller's Disclosure be completed and provided to all potential buyers?
Before they become obligated to buy the seller's property.
How should buyers find out if sex offenders live close to the property they are buying?
Buyers should check the Sex Offender Registry.
What is an odorless gas produced whenever any fuel is burned?
Carbon monoxide gas
Carbon monoxide alarms.
Carbon monoxide is an odorless gas produced whenever any fuel is burned. In any existing building with dwelling units, that has either fossil fuel, burning equipment or an attached enclosed garage, a carbon monoxide detector must be installed in the immediate vicinity outside of each sleeping area or grouping of bedrooms in the dwelling unit with very limited exceptions. A carbon monoxide detector (CO detector) is a device similar to a smoke detector that signals detection of carbon monoxide in the air.
List two hazardous substances that can affect the use of residential property.
Common substances include mold, radon, lead-based paint, and asbestos.
List three types of transfers that are exempt from the law requiring sellers to provide the Real Property Seller's Disclosure Statement.
Court ordered transfers. Transfers to a mortgagee by a mortgagor in default. Transfers by sale under a power of sale in a deed of trust or mortgage or any foreclosure sale under a decree of foreclosure or deed in lieu of foreclosures. Transfers by a non-occupant fiduciary administering a decedent's estate, guardianship, conservatorship or trust. Transfers between co-tenants. Transfers made to the transferor's spouse, parent, grandparent, child, grandchild or sibling (or any combinations of the foregoing). Transfer between spouses under a divorce judgment incidental to such a judgment. Transfers or exchanges to or from any governmental entity. and Transfers made by a person of newly constructed residential property that has not been inhabited.
Name 2 types of disclosure forms that licensees should use.
Disclosure forms provided by the Real Estate Commission, trade associations, or their brokerage firms. Do not create your own disclosure forms.
What are statutory disclosures?
Disclosures that are required by statute or law.
Seller's Disclosure: Exempt Transfers
Every seller of a residential property consisting of 1 to 4 units must complete a Seller's Disclosure Statement. However, some sellers or transfers are exempt from the law: - Court ordered transfers. - Transfers to a mortgagee by a mortgagor in default. - Transfers by sale under a power of sale in a deed of trust or mortgage or any foreclosure sale under a decree of foreclosure or deed in lieu of foreclosures. - Transfers by a non-occupant fiduciary administering a decedent's estate, guardianship, conservatorship or trust. - Transfers between co-tenants. - Transfers made to the transferor's spouse, parent, grandparent, child, grandchild or sibling (or any combinations of the foregoing). - Transfer between spouses under a divorce judgment incidental to such a judgment. - Transfers or exchanges to or from any governmental entity. and - Transfers made by a person of newly constructed residential property that has not been inhabited.
List two activities associated with stigmatized property.
Ghosts, group homes, homes with defective products, murders, suicides, illness, or criminal activity.
Lead Hazards: 10-day Inspection Period
Homebuyers have a 10-day period to conduct a paint inspection or risk assessment for lead-based paint or lead-based paint hazards. The seller and buyer mutually may agree, in writing, to lengthen or shorten the time for inspection. If such paint is found, the buyer typically looks to the seller to remedy the situation. If the seller chooses not to do so, then the buyer can rescind the contract with no penalty or legal recourse. Although homebuyers may waive the inspection opportunity, they should get a lead inspection from a certified inspector before buying if they have any concerns about lead on the property.
Types of Property Inspections
If agreed upon in the contract of sale, the buyer may have several inspections performed on the property. The inspections are designed to protect the interests of the seller, buyer, insurance agencies, lenders, and other interested parties by determining the condition of the building and its integrated systems. For the buyer to schedule inspections, the seller must make the property accessible and have all the utilities turned on. The buyers must give the seller reasonable advance notice of the date and time of the inspection(s). Buyers and/or their contractors must be careful not to damage the real or personal property of the seller. Both buyers and sellers may be present during the inspection(s). If a buyer or his or her agents or contractors damage the property during the inspection(s), the buyer must immediately reimburse the seller for the costs incurred in correcting such damage.
Lead Hazards: Protect Your Family Pamphlet
In addition, the EPA created a pamphlet called "Protect Your Family from Lead in Your Home" to help buyers and renters who live in a home built prior to 1978 understand the risks of lead and what to avoid.
Name three areas of a property that typically are tested for termites.
Interior of the residence, 3 feet surrounding the residence, garage, outbuildings located within 3 feet of the residence or garage.
When to Make Disclosures
Knowing when to disclose is just as important as making the disclosure itself. Usually the timing of the disclosure is based on statute or the contract. When a statute requires a disclosure, it usually indicates when that disclosure must be made. A statute or contract may also identify an event that creates the disclosure requirement. Remember, real estate licensees have a duty to disclose material facts regarding the real estate transaction to their clients and customers. A licensee can breach that duty by not telling the truth, by remaining silent, or by allowing a party to continue transacting according to a misrepresented material fact. Licensees must disclose and correct any misunderstandings during a real estate transaction.
Potential Lead, Smoke, and Carbon Monoxide Hazards
Lead is an environmental neurotoxin that has been used extensively in consumer products such as paint. It gave the paint a shine that outlasted exposure to sunlight, resisted mold and mildew, and gave the paint a pleasant odor. However, because lead-based paint lasted so long, many people used it on the inside of a dwelling and because it was difficult to remove, most people just added coat after coat. The problem was that the paint began either to flake off or, with wear; it became dust in the air. After even a few exposures to lead in these forms (lead poisoning), it can build up in the brain. The results of this accretion are irreversible and can be as horrific as a 30-point IQ drop, among other physical and neurological damage. Lead can be removed from the body via chelation therapy. However, once the damage is done, chelation works merely to keep the damage from getting even worse. Although it was banned for residential use in 1978, many housing units in still contain lead-based paint. The federal Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 US Code §4852d) became effective on September 6, 1996 for owners of residential property with 1 to 4 units. Because lead is highly toxic, the Environmental Protection Agency (EPA) developed a one-page disclosure and a lead-hazard information pamphlet that must be provided to a buyer (or renter) by a seller (or landlord). The disclosures pertain to residential housing built before 1978 because the Act banned lead-based paint for residential use in that year. Properties affected by the law are called "target housing." Target housing does not include pre-1978 housing which is: - Sold at a foreclosure sale (but a subsequent sale of such a property is covered). - A "0-bedroom dwelling" (e.g., a loft, efficiency unit or studio). - A dwelling unit leased for 100 or fewer days (e.g., a vacation home or short-term rental), provided the lease cannot be renewed or extended. - Housing designated for the elderly or handicapped, unless children reside or are expected to reside there. - Leased housing for which the requirements of the Rule have been satisfied, no pertinent new information is available, and the lease is renewed or renegotiated. - Rental housing that has been inspected by a certified inspector and found to be free of lead-based paint.
What federal law was passed to prevent crimes against children?
Megan's Law
Home Inspection
Most buyers are familiar with the general home inspection in which a licensed home inspector looks for signs of visible damage and defects in the property. A home inspection report is not an appraisal or warranty and does not provide guarantees. Home inspectors perform home inspections based on observation of the visible and apparent condition of the structure and its components on the date of the inspection. For a standard home inspection report, a home inspector will look at the condition of the home's HVAC system, interior plumbing and electrical systems, roof, attic and visible insulation, walls, ceilings, floors, windows and doors, foundation, basement, and structural components. The inspector prepares a written inspection report of the current condition of the home and makes notations about other systems of the property that should be inspected by a specialist. For example, an inspector who notices flickering lights or outlets that do not work, might suggest that the buyer ask an electrician to check out the electrical system. If evidence of termites is noted, the HVAC system is faulty, roof tiles are missing, or there are other problems mentioned in the report, the buyer may hire specialists to determine repair or replacement costs. If something material is found as a result of the inspection, buyers may walk away from the contract or negotiate with the seller to make repairs, pay closing costs, or reduce the sales price. Sellers may choose to ignore the buyers' demands or may agree to some or all the buyers' requests. A homebuyer, who wants to get an FHA loan to purchase a residential property of one-to-four units, must receive and sign a notice called "For Your Protection: Get a Home Inspection." This disclosure informs the buyer about the value of an unbiased home inspection and explains the difference between an appraisal and a home inspection.
Termite-Wood Destroying Insects
Most residential sales agreements allow buyers to get a wood destroying insect (WDI) report (termite report). Typically, it is required when a homebuyer is obtaining a loan to buy a house; therefore, buyers pay for the inspection. Because termites feed primarily on wood, they can compromise the strength and safety of an infested structure. Termite damage can make homes unlivable until expensive repairs are made. Unless the buyer is applying for a VA loan, buyers pay for the WDI report that is prepared and issued by a certified pest control company. The following areas are included in the inspection: Interior of the residence (including the basement). - 3 feet surrounding the residence. - Garage or within 3 feet of the garage (this applies to both attached and detached garages). - Outbuildings located within 3 feet of the residence or garage. - A maximum of 10 linear feet of the nearest portion of a fence on the property that is within 3 feet of the residence or garage. The WDI report will identify the portions of the property with existing damage, infection, or infestation. It also points out areas that may have impending damage, infection, or infestation. Lenders usually require that any current infestation or damage discovered in the property to be corrected prior to closing the transaction. The cost of correction is usually paid for by the seller not to exceed 2% of the purchase price. Termite certificates issued in the District are written on the MD-1 form that is used for conventional, FHA, and VA real estate transactions.
Do real estate licensees have to disclose if a homicide, suicide, natural death, or felony occurred on the property?
No
Overhead Power Lines
Power lines often affect the desirability of the property. Overhead power lines produce low-to mid-frequency magnetic fields (EMFs). These types of EMFs are in the non-ionizing radiation part of the electromagnetic spectrum. EMFs are areas of energy that surround any electrical device. Power lines, electrical wiring, computers, televisions, hair dryers, household appliances, and everything else that uses electricity are sources of EMFs. When working with sellers and buyers, you may encounter properties located close to overhead power lines, which often affects the selling price. A potential buyer may drive up to a beautiful property with good curb appeal and the interior amenities that meet the buyer's needs. However, there are high power lines approximately 200 feet behind the property. Many potential buyers do not want to see the huge towers and power lines from their windows. Power lines are not exactly a view amenity. In addition to the negative aesthetics of the power lines, many potential purchasers are concerned about the prolonged proximity to power lines and EMFs. Although scientists are still studying how EMFs may influence cancer risk, studies show that homeowners currently living near power lines should not be concerned. Many people do not agree because other studies concluded that EMFs cause illness and may be a contributory factor to some types of cancer. Therefore, many potential buyers do not want their children playing near the overhead power lines or subjected to the EMFs. The public's fear of the power lines (whether based on reason, or not) may affect the sale.
What disclosure form must every seller of a residential property consisting of 1 to 4 units to complete for prospective buyers?
Real Property Seller's Disclosure Statement
Real Property Seller's Disclosure Statement
Real estate transactions include several mandatory disclosures and elective inspections that are completed prior to closing. Under District of Columbia law (DC Code §§42-1301 to 1311 and DCMR 2708), the seller is required to provide the buyer with the Real Property Seller's Disclosure Statement (Seller's Disclosure). Additionally, sellers must give buyers information regarding the hazards of lead-based paint if the property was constructed prior to 1978. Section 42-1301(a) of the DC Code requires every seller of a residential property consisting of 1 to 4 units to complete either a Real Property Seller's Disclosure Statement. Sellers use the Real Property Seller's Disclosure Statement form to disclose defects (including latent defects) and other information that they actually know about the property. The information contained in the Disclosure Statement is not a warranty by the sellers as to the condition of the property of which the sellers have no knowledge or other conditions of which the sellers have no actual knowledge. The overall intention is to provide meaningful disclosures about the condition of the property being transferred. The information provided in the Disclosure Statement is based upon the actual knowledge of the sellers. Buyers may want to get an inspection by an independent home inspection company.
What property is exempt from the federal Residential Lead-Based Paint Hazard Reduction Act of 1992?
Residential 1-4 unit property built after 1978 and target housing.
To what type of property does the federal Residential Lead-Based Paint Hazard Reduction Act of 1992 pertain?
Residential property with 1 to 4 units.
Death on the Property
Section 47-2853.198 of the DC Code states that a homicide, suicide, accidental death, natural death, or felony that occurred on the property is not considered a material fact. Therefore, real estate licensees and owners of real property do not have to disclose to a prospective purchaser (or tenant) that a homicide, suicide, natural death, or felony occurred on the property. Additionally, owners and the agents do not have to disclose that an occupant of a property was living with human immunodeficiency virus (HIV) or died from AIDS-related complications.
Lead Hazards: Seller, Landlord, Agent Obligations
Seller/Landlord Obligations for Lead-Based Paint Disclosures - Give buyers/renters a 1-page "Lead Warning Statement". - Give buyers/renters the "Protect Your Family From Lead in Your Home" pamphlet. - Disclose all known lead-based paint and lead-based paint hazards in the dwelling and provide buyers/renters with any available reports. - Include standard warning language as an attachment to the contract or lease. - Complete and sign statements verifying completion of requirements. - Retain the signed acknowledgment for three years. Give buyers a 10-day opportunity to test for lead (for sale transactions only). - Real Estate Agent Obligations for Lead-Based Paint Disclosures - Sellers/landlords are aware of their obligations. - Sellers/landlords disclose the proper information to buyers and renters. - Leases and sales contracts include proper disclosure language and signatures. - Sellers give buyers the opportunity to conduct an inspection for 10 days or another mutually agreed-upon time.
Legal Sources
Since disclosure laws can come from a variety of legal sources, you should be aware of the laws in which disclosure rules originate in order to be compliant. Legal Sources of Disclosure Federal statutes and regulations: The federal government has applicable real estate disclosure laws, such as the United States Code (USC) and the Code of Federal Regulation (CFR). State statutes and regulations: The District of Columbia statutes and regulations concerning disclosure are found throughout the DC Official Code and the DC Municipal Regulations (DCMR). Common law: Most common law disclosures are codified into statutes. Unfortunately, sometimes the statute does not specify how or when to make a specific disclosure. In this instance, a review of the original case law is required. Contract law: A contract can specify which items require disclosure and which do not.
Name the alarms that must be installed and maintained in buildings with residential occupancies.
Smoke and carbon monoxide alarms.
Name four sources of volatile organic compounds (VOCs).
Sources of VOCs include aerosol sprays, air fresheners, automotive products, cleansers and disinfectants, dry-cleaned clothing, formaldehyde, glues, paint, paint strippers, solvents, stored fuels, and wood preservatives.
Smoke Alarm and Carbon Monoxide Alarm Compliance
The District of Columbia requires the installation and maintenance of smoke and carbon monoxide alarms in buildings with residential occupancies. Before closing, the seller must smoke alarms (and carbon monoxide alarms if applicable) installed and operational.
Timing of the Seller's Disclosure
The Real Property Seller's Disclosure Statement (Seller's Disclosure) must be completed and provided to all potential buyers before they become obligated to buy the seller's property. This is true whether sellers use a real estate licensee or sell the home themselves. Usually the listing broker has the seller prepare the Seller's Disclosure at the time the listing is taken. Sellers should accurately complete this form and have it available for all interested buyers. The listing agent (seller's agent) should provide the Seller's Disclosure Statement to the prospective purchaser or to the selling agent (cooperating or buyer's agent) assisting the purchaser promptly upon notification that an offer is going to be made. If the listing agent does not know in advance that an offer is to be made, the listing agent should provide the Seller's Disclosure Statement at the time the listing agent receives the written offer. The selling agent should make every effort to ensure that the prospective purchaser has the Seller's Disclosure Statement before submitting the offer to purchase the property.
How can disclosures be made?
The disclosure process is not the same for all disclosures. For example, some disclosures require the use of a specific form; whereas, others only require specific language and content.
How to Make Disclosures
The disclosure process is not the same for all disclosures. For example, some disclosures require the use of a specific form; whereas, others only require specific language and content. If a disclosure is required, it should be in writing since people may forget or misinterpret oral statements. If a law does not require a written disclosure and a question arises as to whether the disclosure was made, the burden of proof falls on the individual claiming to have made the disclosure. In this case, it is typically the real estate licensee or the seller. Real estate brokers and salespeople licensed in the District of Columbia use disclosure forms provided by the Real Estate Commission, trade associations, or their brokerage firms. Do not create your own disclosure forms.
What 1-page statement must be given to all homebuyers (renters) buying (or renting) a home that was built prior to 1978?
The one-page "Lead Warning Statement"
Disclosure Basics
The purpose of disclosure is to ensure that all parties involved in the real estate transaction have sufficient information to make informed decisions. Typically, disclosures are made by sellers and real estate licensees. As you learned previously, real estate licensees have an affirmative duty to ascertain and to disclose material facts to all parties. You must make your clients aware of their disclosure responsibilities. Many of the required disclosures are enumerated in the listing agreement or in the contract of sale, and it is your job to explain them to clients and customers. Unfortunately, when real estate licensees do not comply with the law, they may be subject to civil, criminal, and/or Real Estate Commission action and penalties. All over the country, courts and legislatures are continuing to hold real estate licensees accountable for their activities. You should know the legal sources in which disclosure laws originate, what to disclose, and when and how to make the necessary disclosures. When reviewing any disclosure law, you should identify the statute's exemptions or exceptions to ensure compliance with the law. Important Questions When Reviewing Disclosure Laws What needs to be disclosed? Who is responsible for making the disclosure and to whom must the disclosure be made? When must the disclosure be made? How should the disclosure be made? Does the disclosure require a specific form? Is an oral disclosure sufficient?
Who must complete the Real Property Seller's Disclosure Statement form?
The seller
