If you are looking to sell your Montana home, realize that, as in most states, you will need to follow laws that require home sellers to give a detailed written disclosure report to potential buyers. Your report will need to identify any material defects in the property, from an ailing refrigerator to a leak in the attic. What's more, if you use the services of a real estate agent, your agent might need to make certain disclosures to the buyer based upon professional regulations and Montana state law. Although it's a lot of rules and paperwork, there are good reasons for you to disclose the house's issues to buyers before the sale closes, as we'll explore here.
"Buyer Beware" Is No Longer the Rule in Montana
Until recently, Montana followed the legal doctrine of caveat emptor, meaning "let the buyer beware." Judges refused to compensate buyers for home defects found after the purchase unless the seller had done something to actively prevent the buyer from inspecting the property to find all of the defects. It put responsibility squarely on homebuyers' shoulders to hire professional inspectors and give the property a good looking-over before finalizing the purchase.
In 2023, however, the Montana legislature brought its laws into conformity with much of the United States, and passed legislation requiring sellers of residential real property to provide a disclosure statement to buyers disclosing any adverse material facts concerning the property of which the seller has actual knowledge. (See M.C.A. § 70-20-502. (2023).)
The legislature specified that the disclosure statement should cover matters affecting legal ownership or title, water service or source, the wastewater treatment system, utility connections, as well as matters affecting the buildings or other structures designed or intended for occupancy as a residence, including water intrusion and issues related to any structural system or improvement, including well, septic system, roof, foundation, plumbing, electrical system, heating system, windows, doors, or appliances, and also whether substantial additions or alterations have been made without a building permit, whether there are hazardous materials or pest infestations on the property or in the immediate area, whether there are problems with settling, soil, standing water, or drainage on the property or in the immediate area, whether any portion of the property has been tested or treated for asbestos, radon gas, lead-based paint, mold, methamphetamine, fuel or chemical storage tanks, or contaminated soil or water, and any other adverse material fact, including environmental issues, structural system issues, mechanical issues, legal issues, physical issues, or others.
Your real estate agent can provide you with a copy of the form.
Montana Sellers' Obligation to Disclose Known Mold Issues
Montana's Mold Disclosure Act separately mandates that property sellers who know that a building has mold present in it tell any prospective buyers about the issue before or simultaneously with signing a purchase contract. (See M.C.A. § 70-16-703 (2003).) If mold testing has been done, you'll need to advise prospective buyers of that, too, and give them a copy of the results as well as evidence of any follow-up mitigation or treatment.
By doing this, you insulate yourself from legal liability for the presence of or propensity for mold in the home.
Federal Law Require Sellers of Older Homes to Disclose Lead Dangers
If you are selling a house or condo built before 1978, federal law gives you specific responsibilities to disclose lead-based paint and other sources of lead to prospective buyers. In particular, you'll need to give prospective buyers (before they sign a purchase contract) any known information and available reports you have on lead paint hazards on your property (interior and exterior.
You may use the Department of Environmental Protection (EPA) form for this purpose: Disclosure of Information on Lead-Based Paint and /or Lead Based Paint Hazards. The law does not require you to test or remove lead-based paint, but simply to disclose what you know to prospective buyers.
In addition, you must give buyers an EPA-prepared pamphlet, Protect Your Family From Lead in Your Home. And, you'll need to allow buyers 10 days in which to conduct their own lead-based risk assessment or inspection. See Seller Responsibility to Disclose Lead-Based Paint Hazards for details.
Montana Real Estate Agents' Obligations to Disclose Property Defects
Montana places separate requirements on real estate agents involved in a property sale. M.C.A. § 37-51-313 (2023) requires a home seller's agent to disclose to a buyer or the buyer's agent any known "adverse material facts that concern the property."
Montana defines an "adverse material fact" (in M.C.A. § 37-51-102) as one that the agent should recognize as significant enough to affect someone's decision to buy, and that might materially affect the value of the property, affect its structural integrity, or present a documented health risk to people living there.
What does this mean in practical terms? Imagine that you tell your real estate agent that you're really hoping to sell the property quickly, because you're not sure how much longer the house's foundation, built out of piled up stones over a century ago, will hold out. Or the agent, in walking around to prepare the property for sale, notices this and other problems without your input (being an expert on real estate matters). An unsteady foundation is surely among the "adverse material facts" that would affect someone's willingness to buy the property. Thus the agent would have a legal obligation to report this fact to the buyers. One who fails to disclose such a fact could lose their professional license.
Still, there are important carveouts to Montana's requirements. The real estate agent need not actually inspect the property or verify any statements made by the seller. Essentially, the agent is merely required to tell the buyer what was manifestly obvious or what you, as the seller, actually mentioned about the property. What's more, the law additionally protects agents by saying they must emphasize to buyers that they have no personal knowledge of the property.
In addition, the seller's real estate agent need not disclose that someone who lived in the property has or has had a communicable disease or that the property was the site of a suicide or felony.
The Value of Making Disclosures to Home Buyers in Montana
The disclosures made by you and your agent should give potential buyers a fairly comprehensive snapshot of any known defects with your property, and help them know what to pay particular attention to when commissioning inspections of their own. There are many advantages to providing such complete information.
First, it sets clear expectations and can smooth negotiations while you're in escrow. The buyer will see from the start that you are being open and honest about the condition of the house, and will have less reason to react with shock and dismay if and when the inspection report turns up defects.
Second, the disclosure prevents buyers from later claiming that they did not know about a particularly defect. Imagine that there is a busted HVAC system, and you do not say anything about it. Even if the sale does close successfully, the buyer will quickly discover the problem upon trying to turn on the heat. Any claim that you "didn't know" about it would be, at best, difficult to believe. The buyer will be angry; not just because you were dishonest, but also because the buyer will now have to face the (probably significant) cost of remediating the basement and fixing the leak. This creates a risk that the buyer might sue you for breach of contract or fraud.
Even if you have strong arguments to beat such a buyer's lawsuits, nothing prevents the buyer from suing. You would be forced to hire an attorney and engage in the stress of litigation. Making a full and forthright disclosure helps ensure that the buyer's expectations match reality and that your home sale in the Big Sky State goes as smoothly as possible.
