It is no surprise that South Dakota sellers and buyers of residential real estate have contrary incentives. Sellers want to collect as much as possible for their property, while you want to pay as little as possible.
To that end, sellers know that they'll profit the most if their property appears flawless: perfectly maintained, good as new, and likely to increase in value.
You, on the other hand, want to discover all the flaws, large and small, before closing. Unfortunately, there is a natural asymmetry of information; the seller has typically lived in the house for many years and therefore knows many of the home’s defects all too well. You have probably toured the home once or twice, perhaps in the company of a real estate agent.
Fortunately, your legislators in Pierre have passed laws aimed at protecting you by closing this information gap. South Dakota, like many states, requires sellers to reveal various problems that could affect the property’s value. For example, a seller cannot fraudulently conceal major defects, such as a cracked foundation or mold infestation. If you’re buying a South Dakota home, what disclosures are you entitled to receive from the seller, and how much stock should you place in them?
South Dakota Stat. § 43-4-37 et seq. broadly covers the South Dakota home seller’s disclosure obligations to you. The law requires a seller of residential real property to furnish to the prospective buyer a completed copy of the disclosure statement before the buyer has even made a written purchase offer.
What's more, if the home seller becomes aware of any other defects requiring disclosure between when he or she gives you the statement and the closing of the deal, the seller is required under this statute to give you a written supplement to the original disclosure statement. So, for example, a seller who gives you a disclosure form early on in the transaction, but then learns of a huge termite infestation in the basement before the closing, must give you an updated disclosure.
What does this disclosure form look like? South Dakota’s legislature has actually codified the disclosure form that the seller should use in South Dakota Stat. § 43-4-44. The South Dakota Department of Labor and Regulation has also created a standard disclosure form—four pages long and covering the requirements of the statute.
South Dakota’s form is fairly extensive. The form has about 100 questions divided into different sections, asking the seller about potential problems with everything from the appliances in the home to the legal title.
If your seller tries to give you a different-looking form, you should be suspicious, and have your real estate attorney examine it to ensure that all of the required information is covered. You should also reject any attempt by a seller to give you a purely oral disclosure; South Dakota requires that you be given a written (and signed) statement.
What if the disclosure statement reveals something really damning about the home? Pursuant to South Dakota Stat. § 43-4-39, you may terminate the sale within three days of having received the disclosure statement (or a supplement to an earlier disclosure statement).
South Dakota is clearly helpful to buyers like yourself. Not only does it require seller disclosures, but it also promulgates a detailed disclosure form that sellers must use, and creates incentives for sellers to be honest.
Still, you should maintain a healthy measure of doubt regarding the truth or completeness of any disclosure information given to you by the seller. Even if the seller is totally honest, it is more than possible that he or she genuinely does not know about every material defect in the home. For example, many people could live in a home for years without knowing about the presence of radon gas or asbestos, or about an impending structural issue, or about moisture in the attic.
The smartest way to protect yourself is to hire a professional home inspector to complete an investigation of the home and prepare a written report for your review, prior to the home closing. The inspector might use the seller’s disclosure of known defects as a starting point, but he or she will also go beyond the statement, examining every nook and cranny of the home, to find potential problems. If the problems are great enough, you may be able to cancel the sale, negotiate for a reduced price or repairs, or take other appropriate measures.