If preparing to sell your Maryland home, you probably want to make it appear as perfect as possible for prospective purchasers. That might mean repairing, decluttering, cleaning, landscaping, and more. However, it should not include hiding existing defects.
Maryland law requires you to reckon with the unappealing aspects of your home, through various disclosures of defects to buyers. Marylanders, like sellers in many states, are required to reveal problems that could affect the property's value or desirability. If you're selling your Maryland home, what must you disclose, and when?
The relevant portion of the real property section of Maryland's Code, Md. Code § 10-702, requires sellers of residential real estate to complete a form—known as the Residential Property Disclosure and Disclaimer Statement—setting forth conditions and defects with the property.
Maryland is somewhat unique in that sellers can choose between either giving the buyer a disclosure of known defects or a disclaimer as to the condition of the house (but not both). In the latter case, you would be selling the property "as is," but must at least mention any known latent defects.
Most buyers will expect a seller who has lived in the property (as opposed to a short-term investor) to go with the full-disclosure option, and detail any material facts of which you are aware that negatively affect the property. This could cover a wide variety of home features, ranging from the condition of the roof to the existence of an underground storage tank.
You are required to provide written copies of the disclosure/disclaimer form to potential buyers. Samples can be found online, and your real estate agent or attorney will provide you a copy as part of the standard materials.
Upon examining the form, you’ll notice that it’s actually divided into two parts, making clear that you have the option of filling out either the “Disclaimer” or the “Disclosure” portion.
If you fill out the “Disclaimer” portion of the form then you “make no representations or warranties about the condition of the property.” This is basically saying that you’re selling the home “as is.” The buyer will assume liability for any defects that might or might not exist in the home. If, for instance, a water main bursts a week after the closing, the buyer cannot look to you for payment or reimbursement.
But that doesn't let you entirely off the hook. You will still be expected to list any latent defects in the home about which you have actual knowledge; in other words, issues that you know about (without needing to hire an inspector or the like) but that the home purchaser "would not reasonably be expected to ascertain by a careful visual inspection and that would pose a direct threat to [his or her] health or safety."
The disclaimer also states that, except for the disclosed latent defects, you make "no representations or warranties as to the condition of the real property or any improvements" on it.
At first, choosing the disclaimer option might sound like an attractive option for limiting your liability. But be careful. Giving a potential buyer a disclaimer might raise red flags. The buyer might wonder why you’re so quick to wash your hands of the home, and get spooked into tougher negotiations or pulling out of the deal altogether.
Your other option is to fill out the disclosure portion of the form. This asks you to answer a variety of questions. You will need to state “yes” or “no” to whether there are any material defects in specific areas—the floors, the walls, the fire sprinkler system, and so on (including an "Other" clause).
The statute lists types of latent conditions that must be disclosed if you choose the disclosure option. For example, Md. Code Ann., Real Prop. § 10-702(e)(1) states that you must disclose the condition of the water and sewer systems, the structural systems, the plumbing, electrical, heating and air conditioning systems, the existence of wood-destroying insects, the presence of hazardous materials, and any other material defects known to the seller.
In addition, you may make comments to explain your answers on the form. These are a good way to explain any issues, particularly if “yes” or “no” doesn’t tell the whole story. For example, one question asks whether the air conditioning is supplied to all rooms. If you say “no,” this could alarm a buyer. But if you add a comment indicating that all rooms except the basement are air conditioned, this can minimize the impact.
Note that the form also asks you to identify non-defect issues, for example whether the home is under any restrictions from a homeowners' association, or whether the home is located in a flood zone or in a historic district (which would limit potential renovations).
Study each of these disclosures carefully before answering, and check with your real estate agent or attorney if you are uncertain how to answer.
You won't be asked about everything. The Maryland disclosure form intentionally doesn't ask you to disclose information about past occupants of the property: whether someone living there had HIV or AIDS, or whether the property was the scene of a crime, death (accidental or natural), felony, or suicide. These exclusions are at § 2-120 of the Real Property Code.
If buyers ask about such issues, you cannot lie; but you can say that you are not able to answer.
The disclosure form also doesn't ask about every possible aspect of the home. For example, while it asks about the condition of the dishwasher, it doesn't ask about other major appliances. Nevertheless, the final question on the disclosure portion asks you to disclose any material latent defects that were not specifically enumerated. Therefore, if there's a defect in one of the home's features, you'll need to affirmatively say as much.
At first, all of this might seem to be a tremendous burden. Why would your elected representatives in Annapolis make it harder for you to sell your home by leading buyers straight to its problems?
While it is true that your disclosure could result in a lower purchase price, the legislature is actually doing you a favor: If you disclose a known defect, the purchaser cannot turn around months after the transaction has closed and sue you for fraud or misrepresentation. Indeed, the disclosure form will insulate you from this sort of liability, which could otherwise cause legal fees and headaches long after you've moved on.