Selling a home is no small transaction. It involves a large amount of paperwork, and typically includes interactions between brokers, real estate agents, title officers, appraisers, lender’s agents, and other professionals. Once the sale closes, it is a relief when everyone walks away happy. For a sale to close properly in Utah, the seller must, legally, disclose certain conditions about the home to the prospective buyer. No seller wants to face legal repercussions for inadequately disclosing property defects. The following will explain how to avoid liability for inadequate disclosures when selling your Utah home.
Federally Required Seller Disclosures
First off, realize that federal law requires sellers of homes across the U.S., if they were constructed prior to 1978, to advise buyers of the potential existence of lead-based paint there. (See 42 U.S.C. § 4851 et. seq.) Go to the "Protect Your Family from Lead in Your Home - Real Estate Disclosure" page of the E.P.A. website for a copy of the brochure that you must give buyers in these circumstances.
Statutorily Required Seller Disclosures in Utah
The only disclosure explicitly required by Utah law is that sellers tell prospective buyers whether there has been “use, storage, or manufacture of methamphetamines” in the home. (See Utah Code. Annot. § 57-27-201.)
Utah Code. Annot. §57-1-1 outlines the disclosures that sellers do NOT have to make. A seller does not have to disclose that a home was the location of a homicide, a suicide, a decontaminated methamphetamine lab, or residence by a person with a life-ending disease such as AIDS.
Despite these minimal statutory requirements, however, Utah sellers routinely provide much more information to buyers, as described next.
Disclosures Made by Sellers to Avoid Legal Liability
In Utah, most real estate agents have their home-selling clients fill out a set of standard disclosure forms, and then give these to the buyers prior to closing.
These disclosures provide a wide range of information, such as the seller’s knowledge of any zoning or legal violations on the property, legal actions affecting the property, location within a Greenbelt, damage to the roof, past-due utility payments, problems with culinary water, damaged sewer or septic tanks, damaged heating and cooling devices, damaged equipment, damaged features, damaged appliances, damaged fireplace or stove, termite damage, rot, mold, remodeling that affected a significant portion of the home, structural defects, boundary disputes, easements, electrical defects, water damage, hazards, toxins, location within the governance of a homeowners association (HOA), past-due assessments to the HOA, and any property damage claims reported to an insurance agency. Most sellers should also take special care to disclose that square footage estimates are estimates only.
The reason for these disclosures is simple. While most home buyers conduct an inspection and a “walk through” prior to purchasing a home, many of them also discover defects after closing. At that point, however, it’s difficult for them to bring suit against the seller for failure to disclose these defects unless they can also prove that the seller committed fraud. By disclosing as many defects as possible before the closing, sellers can actually increase buyers’ awareness of issues with the home and reduce the chances of a fraud suit.
Risks of Lying Within the Seller’s Disclosures
Even with the convenience of a seller’s disclosure form, some sellers still try to conceal defects. Lying in a seller’s disclosure could subject you to at least two types of liability: liability for fraud and liability for fraudulent nondisclosure.
Fraud: In Utah, lying on a seller’s disclosure in a way that induces a homebuyer to purchase your home is fraud. For instance, if you were to say that you’ve never repaired leaks in the basement, but in fact have patched an area that’s now hidden by boxes, that would be a lie. Don’t do it. Fill out the seller’s disclosures, and fill them out honestly.
Fraudulent nondisclosure: Fraudulent nondisclosure involves failing to disclose a material defect. For example, if you were to incorrectly claim that you never noticed any leakage in the basement at all, that would be a nondisclosure.
You might ask, how can I know about and disclose every tiny problem with my house? It’s true that some issues like faulty wiring behind the walls or termites in the attic may not have caught your attention, in which case you cannot be expected to disclose them. While a home seller does not have to disclose every conceivable problem with a home, the key is whether you knew or should have known about the problem. You may be liable for failing to disclose known, hidden defects that a reasonably prudent buyer would not discover during a typical inspection. (This comes from the court case of Mitchell v. Christensen, 31 P.3d 572 (Utah 2001).)
This is why it is a good idea to simply disclose defects outlined in the seller’s disclosures form. In fact, even real estate agents may be held liable for failing to disclose known defects.
Ask your real estate agent to provide you with a seller disclosure form (if he or she hasn’t already). If you aren’t represented by an agent, see whether you can obtain a form from an agent or get help with this task from a real estate attorney. In any case, be thorough and complete in your disclosures. It will allow you to successfully sell your home and avoid liability after closing.