“Aloha” is the Hawaiian word meaning both “Hello” and “Goodbye.” Before you can say hello to your new home, you’ll need to say goodbye and sell your old one. And before you can sell your home in Hawaii, you’ll need to make certain required disclosures about the home and property’s condition to the potential buyer. These disclosures must be made before any purchase contract is signed.
Hawaii Rev. Stat. 508D provides that “no seller may sell residential real property unless… Prior to the sale of such residential real property, a disclosure statement is… Signed and dated by the seller within six months before or ten calendar days after the acceptance of a real estate purchase contract by the buyer.” The disclosure statement must be delivered to and signed by the home buyer.
Importantly, you are only to disclose all “material facts” concerning the property. “Material facts,” according to the legislation, are defined as "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 merely 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 Hawaii Association of Realtors has produced a standard form that is commonly used by sellers. The four-page form asks you to consider different elements of your home:
The form also gives you plenty of additional space, should you need to explain any of your answers. Sometimes, it is helpful to explain a defect, particularly if the defect is not that significant, while merely checking “Yes” would worry the buyer.
Note that your disclosure form must also state that the buyer has the right to seek independent legal or expert advice regarding the property’s condition, according to Hawaii Rev. Stat. 508D(11).
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 acquired immune deficiency syndrome (AIDS) or AIDS related complex, or had been tested for human immunodeficiency virus” 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, something like a violent crime or notorious incident.
The purpose of these exclusions is to eliminate unnecessary gossip surrounding a home sale. Still, you should be aware that your potential buyer may still Google your address. Therefore, if your home was the site of an unseemly crime (for example), you should be prepared to address the buyer’s concerns head-on, even if you do not technically need to disclose it.
Also importantly, you are required only to disclose defects about which you have actual knowledge. According to the statute, the seller “shall be under no obligation to engage the services of any person in the investigation, research, or preparation of the disclosure statement.” In other words, you do not need to hire an inspector to verify whether or not there are defects in your home. (The buyer can, and should, do this). You need to report only what you yourself have observed or know to be true.
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. Hawaii Rev. Stat. 508D-9 requires that you “prepare the disclosure statement in good faith and with due care.” The statute defines "good faith and with due care" as “honesty in fact in the investigation, research, and preparation of the disclosure statement.”
Failure to do so, of course, 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 may turn hardball, and you may end up paying more for repairs than you expected, or offering a price reduction.
Second, you face future legal liability under this statute. For example, imagine that you sell your Honolulu home. On your disclosure form, you claim 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.
This creates a risk that 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.
Fortunately, Hawaii is favorable to sellers in that Hawaii Rev. Stat. 508-D(17) creates a two-year statute of limitations on any actions against you from the buyer from the date of the disclosure form. This means that if 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' disclosure forms, but disclosure can put a potential buyer at ease.