Buying a Montana Home: What Does the Seller's Disclosure Form Tell Me?

How home buyers can deal with Montana's lack of a required seller disclosure form.

As a homebuyer in Montana, you want to be sure to get the benefit of your bargain. It is in your best interests to know as much as possible about the property before you sign the purchase contract.

For example, you would want to know about any rodent infestations, blown electrical sockets, or moldy carpets. These sorts of defects decrease the value of the home. But while most states would  require the seller  to issue you a disclosure statement that details all known material defects, Montana has no such law. While there are minimal requirements for disclosure when a licensed real estate agent is involved, they are not extensive. What are the regulations surrounding disclosures in Montana, and how can you protect yourself as a homebuyer?

Disclosure Law in Montana for Home Sales

Montana does not have a piece of legislation that requires your seller to hand you a piece of paper that clearly discloses all known defects. This is different from the majority of states. Montana follows the traditional doctrine of  caveat emptor(“let the buyer beware”). Under this doctrine, judges ordinarily refuse to compensate buyers for 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.

Importantly, however, Montana does require certain disclosures if the seller uses a licensed real estate agent to sell their home.  M.C.A. § 37-51-313  requires that, “A seller agent is obligated to the buyer to… disclose to a buyer or the buyer agent any adverse material facts that concern the property and that are known to the seller agent….” The law  defines  an “adverse material fact” as “a fact that should be recognized by a broker or salesperson as being of enough significance as to affect a person’s decision to enter into a contract to buy or sell real property and may be a fact that… materially affects the value, affects structural integrity, or presents a documented health risk to occupants of the property.”

In layman’s terms, the agent must tell you about any significant issue with the property about which he or she is aware. For example, if the owner told the agent that the heating system never works in the winters, or the agent notices a significant leak coming from the ceiling while touring the home, the agent is obligated to disclose this information to you, the buyer. An agent who fails to disclose such a fact to the buyer could lose his or her license.

While there is no law that requires the seller to give you a disclosure report, some sellers may do so, or you can request one as part of your negotiations. If the seller gives you such a disclosure, it may be based purely on the seller’s personal knowledge. In other words, the seller may disclose “all” of the problems with the home about which he or she is aware, but will not invest the money in hiring an inspector to find other problems with the home.

Should You Trust These Disclosures?

As a buyer, you should not be overly comforted by Montana’s limited legislation regarding disclosure. After all, a real estate agent is “not required to inspect the property or verify any statements made by the seller.” The agent is only required to disclose to the buyer what was totally obvious or what the seller actually mentioned about the property. It would be very difficult for you to prove that the agent somehow knew of serious problems with the home, and defrauded you into buying it anyway.

Even if the seller does make a voluntary disclosure, you should not necessarily assume that the disclosure is comprehensive. A sneaky seller might disclose only a small problem in an effort to build trust (e.g., the garage door needs oiling) but omit more significant problems (e.g., the home’s foundation is being eaten by termites).

What does all of this mean for you? Simple: You should do your own independent inspection of the property and not rely solely on what the seller or the agent tells you (or doesn’t tell you). This means hiring one or more inspectors to perform complete  investigations  of the home. Will this cost some money? Yes. But remember, those costs are likely to be far less than the costs of remediating undisclosed material defects down the road. Montana law strongly incentivizes you to engage in this sort of due diligence to ensure that you don’t find any unhappy surprises in the home after the closing.

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