If you are looking to buy a home in Arkansas, you must first do your homework. Buyers would be wise to examine trends in the real estate market, the local government, the local school system, and the likely value of the property over time. One of the most important factors for you to consider is the home’s condition at the time that you buy it. Does the hot water work? Are there troubling cracks around the window frames? What about the major appliances? All of these sorts of issues can address the home’s value, and thus affect what you would want to pay for it.
Most states have clear legislation that would require a seller of residential property to give you a written disclosure report. Such a report typically identifies any major physical defects in the property, like those described above.
Arkansas has no such law requiring sellers to disclose these sorts of defects to buyers. Sellers cannot lie to you directly (this would be fraud), but they need not affirmatively warn you that the stove is busted or that there is mold in the basement. However, if the seller uses a real estate agent, the agent may need to make certain disclosures to you. What sort of requirements exist, and how might they affect your decision to purchase an Arkansas home?
Arkansas takes virtually the opposite approach from other states, in that Arkansas courts generally enforce caveat emptor clauses in purchase contracts. Under the doctrine of caveat emptor (“let the buyer beware”), judges ordinarily refuse to compensate buyers for home defects found after the purchase, unless the seller did something to actively prevent the buyer from inspecting the property to find all of the defects.
Despite the lack of legislation on disclosure, and the caveat emptor doctrine, the Arkansas Real Estate Commission (AREC) has passed some relevant regulations around disclosure of property defects. AREC is a state agency that oversees much of Arkansas’s real estate industry, as well as the licensing of real estate agents. AREC forces licensed agents to abide by a set of regulations.
AREC Regulation 10.6 states: “[A real estate agent] shall exert reasonable efforts to ascertain those facts which are material to the value or desirability of every property for which the [he or she] accepts the agency, so that in offering the property the [agent] will be informed about its condition and thus able to avoid intentional or negligent misrepresentation to the public concerning such property.”
While this language is a bit confusing, it essentially means that any licensed Arkansas real estate agent has a professional obligation to “exert reasonable efforts” to investigate the condition of a property that the agent has been hired to sell.
A reputable real estate agent cannot, for example, sell a house with no working electricity and simply neglect to mention that issue when talking with potential buyers. An agent who behaved in this sort of backhanded manner could lose his or her license. AREC suggests that, while the definition of “material to the value” of the property might be vague, agents must use their common sense and investigate the property that they intend to sell.
Now, remember, nothing requires a seller to use a real estate agent. Plenty of sellers can list their house on their own, which is known as a direct sale. However, many sellers do use a licensed real estate agent to sell their property. This gives you at least some degree of regulatory oversight of the sale, even if the actual seller does not have direct responsibility to disclose defects.
Even AREC’s disclosure requirements are not very extensive. For example, nothing in Rule 10.6 requires the agent to perform a complete floor-to-ceiling investigation of the home before showing it to you, nor does it require the agent to hire a professional inspector to find potential physical defects. The agent needs only to exert a reasonable effort to inspect the premises, obviously a very malleable requirement.
Buying your home is too important of an investment to rely so heavily on a real estate agent; a person who does not even work for you. You best security when it comes to determining the home’s quality is to hire your ownprofessional inspector. Your real estate attorney can probably suggest someone with a good reputation in your area of Arkansas. This person typically has a background in construction or a related trade, and can give you an independent evaluation of the property so that you know exactly what you are buying.
While Arkansas’s laws are not as buyer-friendly as those of some states with regard to mandatory defect disclosures from the seller, hiring an inspector is an excellent way to protect yourself.