Selling an Oregon Home: What Are My Disclosure Obligations?

If you are selling residential real estate in Oregon, you naturally want to make the home seem as attractive as possible. However, Oregon, like many states, also mandates that home sellers reveal various problems that could affect the property's value or desirability. You can't legally conceal a significant defect, such as a broken roof or a weak foundation, and hope the buyer doesn't notice until the sale closes. Nevertheless, this legal requirement actually offers some benefits to you, as discussed below. We'll cover:

• what Oregon law requires of home seller
• situations in which real estate sellers need not provide disclosures
• what exactly you're expected to disclose to home buyers
• what types of defects meet the "materiality" standard requiring disclosure
• why turning a blind eye to home defects might get you in trouble
• federal disclosure requirement for older homes that might contain lead, and
• reasons to make disclosures even if the buyer hires an inspector, and
• the bottom line: advantages to being truthful in home seller disclosures.

What Oregon's Real Seller Disclosure Law Requires

Oregon law, namely ORS 105. § 465(2), requires real estate sellers to deliver to each buyer who makes a written offer to purchase the property a filled-out property disclosure statement. The requirement applies whether selling a single family home, duplex, triplex, quadplex, condominium unit, timeshare, or manufactured dwelling.

If you fail or refuse to provide a property disclosure statement, a buyer has the right to revoke the offer. To avoid that or later lawsuits over undisclosed defects; it is worth putting your attention toward providing a full and complete disclosure statement.

Exceptions to Oregon's Real Estate Disclosure Requirement

The main exceptions, or instances when you don't need to provide disclosures, are when selling a property with more than five dwelling units, or when selling to someone who will use the property for purposes other than a residence for them or their spouse, parent or child, or for the first sale of a home that has never been occupied.

Other exceptions are mostly for people who've never lived in the house, such as a bank that got the property in foreclosure, and court-appointed receivers, personal representatives, trustees, conservators, or guardians.

What Information Oregon's Property Disclosure Statement Requires Home Sellers to Disclose

In Oregon, a seller's property disclosure statement must be in substantially the same form as and use the language provided by the state legislature in the statute, ORS § 105.464. The form takes the guesswork out of what you must disclose. It requires you to answer specific questions regarding the condition of your property, relating to:

• title to the property and existing encumbrances, such as easements and liens
• domestic water sources and irrigation
• sewage disposal
• insulation, including whether there is insulation in the ceiling, walls, and floor
• dwelling structure, including whether the roof leaks and whether any unpermitted additions exist
• dwelling systems and fixtures, such as the electrical and plumbing components of the house
• common interests, like homeowners' association dues and shared common areas.

For most questions, you will be required to answer "Yes", "No," "Unknown," or in some cases "NA" for "not applicable." Each answer must be based on your actual knowledge.

Let's say the question is: Is the outdoor sprinkler system operable? If the sprinkler system is operable without any leak or other problems, the correct answer is more than likely "Yes." Alternatively, if you have never used the sprinkler system, or have not used it in several years, the proper answer is likely "Unknown." If you are uncertain, answering "Unknown" is the best answer. Such answer should alert any buyers who are concerned, to inquire further regarding that issue. And if you have no sprinkler system, you would choose "NA."

Consider each answer carefully. If unsure how to answer, ask your real estate agent or attorney.

What Is Considered a Material Defect in Oregon?

The last question in the Oregon real estate disclosure statement acts as a "catchall" to make sure all issues that might influence a buyer's decision to purchase the property are fully disclosed. Specifically, it asks "Are there any other material defects affecting this property or its value that a prospective buyer should know about?"

You must answer "Yes" or "No". "Unknown" is not an option. If you answer "Yes," you will need to provide a written explanation.

A material defect is a condition that could have a significant (negative) impact on the value of the property. For instance, toxic mold growing in the crawl space below your kitchen could significantly impact the value of your property. Likewise, a venomous spider infestation might significantly impact its value.

Oftentimes it is unclear whether or not a condition is material. Don't be afraid to ask your real estate agent or attorney. Or when in doubt, the safest bet is to disclose.

For Obvious Defects, Don't Try Claiming Lack of Knowledge

Although answers to the questions in the disclosure statement need only be based on your "actual knowledge," a buyer might not believe that you didn't know about a particularly obvious defect. If toxic mold is growing under the kitchen sink, smells odd, and is visibly obvious, but you fail to disclose it, a buyer could infer that you knew of the mold, and therefore sue you upon discovering it after the sale.

To avoid such a dispute with a disgruntled buyer, it is worth examining closets, drawers, and other easily accessible areas of the house for obvious defects. This could be especially prudent if you are selling a house that you have not lived in recently (such as a rental). However, you don't have an obligation to actually investigate or seek out hidden, unknown defects.

Federally Required Disclosures: Lead Paint

In addition to state-mandated disclosures, for certain older houses, federal law requires a lead paint disclosure. (42 U.S. Code § 4852d). If your house was built before 1978, you must give the buyer both a pamphlet titled "Protect Your Family From Lead in Your Home" and a lead paint disclosure. Additional information and sample forms can be found on the HUD website.

Fully Disclose All Known Defects, Even If the Buyer Hires an Inspector

To protect their investment, buyers often have the house professionally inspected (after including this as a contingency in their purchase contract). An inspector will do a thorough examination of the house and likely prepare a written report. However, the inspector can't see water damage through fresh paint, determine whether underground plumbing is leaking, or otherwise find hidden defects. If an inspector misses a defect you knew about and failed to disclose and perhaps even took steps to hide, you are at risk of being sued.

To Avoid Being Sued by Homebuyers, Be Truthful

It is critical to be truthful when making disclosures to home buyers. If you fail to disclose a known defect in your Oregon home, the buyer could sue you for fraud. Among other potential remedies, the buyer might seek to rescind the transaction or sue for monetary damages. Defending a lawsuit is stressful, can cost tens of thousands of dollars (or more), and take years to resolve.

Being honest about existing defects can result in additional negotiations with the buyer. In most cases, disclosed defects can be worked around, and you will have established a relationship based on mutual trust and openness. The bottom line is that an honest and complete disclosure is the best way to avoid defending a lawsuit.

If you have questions about the disclosure statement, ask your real estate agent or attorney.