Imagine that you are looking to sell your Montana home. Most states have legislation that would require a home seller like you to give a detailed written disclosure report to potential buyers. Such reports typically identify any material defects in the property, from an ailing refrigerator to a leak in the attic. In Montana, by contrast, no law requires home sellers to disclose these sorts of defects to the prospective home buyer (so long as they don't make any direct misrepresentations in the course of the sale or block the buyer's ability to conduct inspections).
If, however, 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 state law. And there are some good reasons for you to disclose the house's issues to buyers notwithstanding the lack of explicit legislation requiring this.
"Buyer Beware" the Basic Rule in Montana
Not only does Montana lack any law that requires home sellers to give a formal disclosure statement to a potential home buyer, but Montana courts enforce caveat emptor clauses in purchase contracts. Under this doctrine, which means "let the buyer beware," judges ordinarily refuse to compensate buyers for home defects found after the purchase unless the seller did something to actively prevent the buyer from inspecting the property to find all of the defects.
This puts responsibility squarely on the buyers' shoulders to hire professional inspectors and give the property a good looking-over before finalizing the purchase.
Montana Sellers' Obligation to Disclose Known Mold Issues
Montana's Mold Disclosure Act mandates that property sellers who know that a building has mold present tell any prospective buyers about it before they sign a purchase contract. (See M.C.A. § 70-16-703.) If testing has been done, you'll need to advise the 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 Requires 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 ten days 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
Despite the lack of legislation on seller disclosures, Montana does have some relevant regulations affecting real estate agents. M.C.A. § 37-51-313 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 his or her 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 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
Initially, you might feel fortunate to live in a state that doesn't force you to reveal damaging defects about your property. However, you might be surprised to learn that there are long-term benefits and protections associated with making disclosures—and that, as a result, many Montana sellers choose to affirmatively make them.
Many Montana real estate agents use a Seller's Property Disclosure Statement. This form asks you to check "Yes," "No," or "Don't Know" in response to a few dozen questions about your property. For example, you are asked how old the home is, whether it is the subject of any liens or lawsuits, and whether you are aware of any major problems with its various aspects and features (heating, cooling, electrical, plumbing, and so forth).
The answers should give potential buyers a fairly comprehensive snapshot of any known defects with your property—at least enough to know what they should pay particular attention to when commissioning inspections of their own. The form also gives you additional space to explain any of your responses to those questions in greater detail, and encourages you to attach pages if necessary.
What is the point of this disclosure form, if Montana doesn't require it? First, it sets clear expectations regarding the quality and condition of the home, 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. (Imagine, by contrast, if you were to disclose nothing, after which the buyer hires a home inspector who finds unmitigated outbreaks of termites throughout the home. The buyer would not be particularly pleased, and would likely try to renegotiate the sale price or demand repairs.)
Second, the disclosure prevents the buyer from later claiming that he or she 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 by omission, 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.
Of course, you might have strong arguments to beat such a buyer's lawsuits, especially if your purchase contract included a caveat emptor clause. Still, nothing prevents the buyer from suing you. The buyer might lose the legal arguments, but you will be forced to hire an attorney and engage in the stress of litigation. Making a full and forthright disclosure would ensure that the buyer's expectations match reality. All of this will help to make sure that your home sale in the Big Sky State goes as smoothly as possible.