If you have submitted an offer to buy a home or other residential property in Oregon, the seller must, by law, provide you with what’s known as a “Property Disclosure Statement” prior to closing. Limited exceptions apply, including to the sale of some new homes, foreclosures, and sales by government agencies. If you have questions about whether the seller must provide you a disclosure statement, ask your real estate agent or attorney.
The disclosure statement is designed to disclose defects or issues with the property that may be material to your decision to purchase it. Careful review of this disclosure statement is a critical part of the due diligence you need to complete prior to closing.
That said, you shouldn’t rely exclusively on the disclosures made in the statement in deciding whether to close the sale. Here is why:
For these reasons, the disclosure statement needs to be treated as only a part of your own due diligence. Ultimately, it is up to you to determine whether you’ll be getting what you pay for.
After receiving your written offer to purchase, the seller is required to provide you a copy of the property disclosure statement. (ORS 105.465). In Oregon, the disclosure statement must be presented to you in the form required by the state legislature. (ORS 105.464). If the seller fails to provide the property disclosure statement, you will have the right to cancel the sale at any time prior to the closing. (ORS 105.475(4)).
After receiving the disclosure statement, you have five days in which to look it over and decide whether to revoke your purchase offer. (ORS 105.475(1)). A buyer might do this, for example, upon learning that the property has bigger problems than he or she is willing to take on. The seller would then have to return any deposits you’ve made.
If you elect to revoke your offer to purchase, you must deliver to the seller a separate signed written statement of revocation disapproving the seller’s disclosure. For this reason, it is important to review the statement promptly upon receiving it And even if you decide to go ahead with the purchase, the sooner you take action regarding issues raised in the statement, the fewer last-minute problems you are likely to encounter before the closing.
If you’d like to take a look at the required disclosures (including the form the seller must use), it’s in the Oregon statutes at ORS 105.464. You’ll see that the seller must make disclosures related to:
In addition to disclosing information about the above topics, the seller must also disclose any other material defects affecting the property or its value that you, as a prospective buyer, should know about. (ORS 105.464).
However, what a seller deems immaterial, you may deem material. For example, the seller may have noticed a small patch of mold in the attic. This may not be a big deal to the seller, but if someone in your family is sensitive to mold, you may consider the mold a material defect.
Thus, just because a defect is not disclosed, you shouldn’t assume it doesn’t exist. Do your own due diligence, especially in regard to matters that are material to you.
The representations made by the seller on the disclosure statement are based on the seller’s “actual knowledge” at the time the disclosure statement is completed. This raises two issues.
First, if the seller doesn’t know about a defect, he or she can’t disclose it. Even sellers who have lived in a house for many years may not be aware of hidden defects. Likewise, many sellers may have rented the house out prior to selling it, so they may not be aware of some defects. You must take additional steps, like hiring a professional home inspector, to protect your investment. (The seller is under no obligation to bring in a professional and perform this type of investigation before filling out the disclosure form or selling you the house.)
Second, the common practice in Oregon is for a seller’s real estate agent to have the seller complete the disclosure statement before or soon after listing the property for sale. This means that the disclosure statement may not be up to date if the house has been on the market for a while. You should ask the seller to update the disclosure statement if the one you receive is old.
Review the home seller’s statement carefully. The seller is required to answer each question with a “Yes,” “No,” or “Unknown.” If the seller answers “Yes” or “Unknown,” make sure he or she has included an explanation. After reviewing the explanation, make sure you are fully satisfied with it.
For example, let’s say you’re reviewing the portion of the statement in which the seller must disclose whether or not the property has any moisture problems. Perhaps your seller states that there was a moisture problem in the basement and that it was fixed three years ago. At first blush, this may seem satisfactory. However, you may also want to find out:
The seller may or may not know the answer to such questions, but they need to be asked. If the seller doesn’t know, or doesn’t want to answer, you should alert your home inspector to the concern so he or she can pay particular attention to that issue.
Lastly, don’t ignore the answer “No.” If a disclosure is of particular concern to you, then even if the seller doesn’t indicate a problem, you should direct your inspector to confirm. And if you see the answer “No” but you or anyone else can see, based on a walk-through of the house, that this answer is wrong, you won’t be able to argue that you relied on the seller’s representation. You need to address that issue up front.
It is important to hire a professional home inspector to examine the house. This is a standard part of any home purchase, and your real estate agent should help you make sure that your right to conduct the inspection is written into the purchase contract, as a “contingency.”
An inspector will know a lot more about home construction and structural issues than either you or the seller. And the inspector is an uninterested party who won’t be subject to any biases when examining the house and property and completing the report.
Your purchase agreement will likely contain a deadline by which your inspection must be completed by, so be sure to promptly hire an inspector after the seller has accepted your offer.
You should provide a copy of the statement to your inspector. The statement will supply some basic information and alert the inspector to issues that may require special attention. Whether on the disclosure statement or by other means, you should alert your inspector to any issues of particular concern to you, such as mold or quality electric wiring.
Most Oregon home sale agreements contain this language:
Buyer understands that it is advisable to have a complete inspection of the Property by qualified professional(s) relating to such matters as structural condition, soil condition/compaction/stability, environmental issues, survey, zoning, operating systems, and suitability for Buyer’s intended purposes.
This language means that it is critical that you thoroughly investigate the property to determine if it meets your needs. Whether it is the physical condition of the structure, or the ability to construct an accessory dwelling unit for your mother-in-law, the onus is on you to confirm you the house meets your needs.
Don’t rely solely on the disclosure statement from the seller. Even if the seller intentionally misrepresents a material fact, it may be difficult to successfully sue on that basis. Moreover, such lawsuit will most certainly take a toll on you emotionally and financially.
Talk to your real estate agent and attorney about what additional due diligence is proper for you.