Before you can sell your home in Hawaii, you'll need to make certain required disclosures about the house and property's condition to potential buyers. Unless you fall into an exempt category of seller, you must not only make these disclosures, but do so before any purchase contract is signed.
Hawaii Rev. Stat. § 508D is the relevant statute. It says, at § 508D-4 and § 508D-5 that no one may sell residential real property without signing and dating a disclosure statement within six months before or ten calendar days after accepting a prospective buyer's real estate purchase offer. The disclosure statement must be delivered to and then signed by the home buyer.
Your Realtor can provide you with a standard form for this purpose, most likely one prepared by the Hawaii Association of Realtors. The form asks you to report on numerous aspects of your home, for example:
The form also contains plenty of additional space, should you need to explain any of your answers. Sometimes, it is helpful to explain a defect, particularly if it is not that significant, while merely checking "Yes" would worry the buyer.
Note that your disclosure form must also remind buyers of their right to seek independent legal or expert advice regarding the property's condition, according to Hawaii Rev. Stat. § 508D-11.
You are expected to fill out this form in good faith and using due care. Importantly, however, you are only required to disclose all "material facts" concerning the property. "Material facts" are, according to the legislation, "any fact, defect, or condition, past or present, that would be expected to measurably affect the value to a reasonable person of the residential real property being offered for sale."
In other words, you do not need to disclose every carpet stain or scratch on the wall. You simply need to disclose conditions that are reasonably serious. Common sense dictates what falls into that "material" category. You might also ask yourself: What would you think was important to know before you purchased a home?
The disclosure form does not ask everything. Indeed, Hawaii Rev. Stat. § 508D-8 specifically excludes certain information from disclosure. For example, you are not required to disclose whether an occupant of the property was afflicted with or tested for acquired immune deficiency syndrome (AIDS).
Nor are you required to reveal whether the property "was the site of an act or occurrence that had no effect on the physical structure or the physical environment of the residential real property, or the improvements located on the residential real property." In other words, a violent crime, notorious incident, or rumored haunting need not be disclosed.
The purpose of these exclusions is to eliminate unnecessary gossip surrounding a home sale. Just remember that your potential buyer can Google your address. Therefore, if your home was the site of an incident that made the news, you should be prepared to address the buyer's concerns head-on, even if you do not technically need to disclose it.
Also, the statute requires you to disclose only any defects about which you have personal knowledge. You're under no obligation to hire someone to inspect or investigate the property, perform relevant research, or prepare the disclosure statement. (The buyer will likely want to hire a home inspector). You need to report only what you yourself have observed or know to be true.
Of course, if you have hired home inspectors or the like, and they turn up a problem, it's now within your knowledge, and you must report it.
Was your house built before 1978? If so, See Seller Responsibility to Disclose Lead-Based Paint Hazards for your additional legal obligations toward buyers. The federal Residential Lead Based Paint Hazard Reduction Act of 1992 (42 U.S. Code § 4852d), often called Title X (Ten), seeks to make the public aware of the risk of lead poisoning in housing.
All home sellers have an incentive to make their homes look as perfect as possible. But you should still be honest when filling out your home disclosure form. Again, Hawaii Rev. Stat. § 508D-9 requires that you prepare the disclosure statement in good faith and with due care, defined as "honesty in fact in the investigation, research, and preparation of the disclosure statement."
Failure to do so could lead to a whole host of problems. First off, if the buyer's home inspector turns up problems that you appear to have concealed, the buyer's confidence in you will decrease, negotiations could turn hardball, and you might end up paying more for repairs than you expected, or offering a price reduction.
Second, you'd face future legal liability. For example, imagine that in sell your Honolulu home, you say on your disclosure form that there is no issue with the electric system. After closing, the buyer tries to turn on the lights and half of them fail to work. Any claim that you "didn't know" about the broken electrical system would be, at best, difficult to believe.
The buyer may sue you for breach of contract or fraud. Fraud is often defined as an intentional misrepresentation of a material fact made with knowledge of its falsity, and made with the specific purpose of inducing another person to act, resulting in injury to that person. Your misrepresentation—that you did not know about a very obvious defect—could expose you to liability. At a minimum, it could entrap you in costly and time-consuming litigation when you would like thoughts of your old home to be behind you.
Hawaii law is, however, favorable to sellers in that § 508D-17 creates a two-year statute of limitations on any actions against you from the buyer, starting from the date of the disclosure form. So once two years go by, you no longer need to worry about the person who purchased your home emerging from the woodwork to file suit against you.
Nevertheless, there are benefits to fully and thoughtfully filling out the disclosure form. Not only is Hawaii's form relatively short compared to other states', but disclosure can put a potential buyer at ease.