Selling a New Mexico Home: What Are My Disclosure Obligations?

As you try to sell a piece of real estate in New Mexico, you face the challenge of convincing buyers of its value: how beautiful the home and land are, how well-made the structure is, and so on. Yet New Mexico, like most states, requires that home sellers disclose certain conditions about the home and property to potential buyers, which can add to your marketing challenge. What must you disclose about your home in the Land of Enchantment, by when, and how might this ultimately affect your sale?

Disclosure Laws in New Mexico for Home Sales

The legal requirements placed upon home sellers with regard to disclosures are laid out in New Mexico Statutes § 47-13 et seq., also known as the Real Estate Disclosure Act.

Sellers are expected to provide buyers with a written disclosure of all material defects in their property about which they have actual knowledge. In plain English, this means that you should tell the buyer, in writing, about any significant problems with the property, such as a busted heating pump, a missing window, or a broken pipe.

In addition, your broker will be expected, as a condition of holding his or her license, to tell prospective buyers about any adverse material facts the broker actually knows about the property or the transaction. New Mexico Statutes § 16.61.19.

These disclosures should be given to the buyer before the two of you sign a purchase contract. Intuitively, this makes sense. A buyer who learns of severe defects with the property after signing might quickly renegotiate the price, or back out of the sale entirely.

New Mexico is unique in that its statutory disclosure requirements focus heavily on tax issues. According to New Mexico Statutes § 47-13-4, before you can accept a buyer's offer to purchase your property, you must request from the county assessor the estimated amount of property tax levy with respect to the property and specify the listed price as the value of the property to be used in the estimate, and then give a copy of the assessor's response to the prospective buyer.

The statute also includes extensive discussion of how the county assessor (sometimes referred to as the county clerk) must calculate the property taxes. Obviously, these requirements are intended to ensure that the buyer is not surprised by the amount of taxes that will be owed, after closing.

What Information Is Covered By the New Mexico Real Estate Disclosure Form?

Despite the minimal requirements found in the New Mexico statute, the New Mexico Association of Realtors has created an extensive Adverse Material Facts Disclosure Statement for use by sellers of real estate. Check with your real estate agent or attorney for a copy, or to see whether they have a preferred form.

The disclosure form asks whether the seller actually knows about or is aware of a series of legal as well as physical problems with the property.

For example, it asks whether there been smoke or hail damage, whether any outstanding liens have been placed on the property, and whether any easements would affect the buyer's rights. It asks whether there has been damage to the exterior of the home, or any water pressure or other plumbing problems, or any leaks in the swimming pool or elsewhere.

Remember, if you are not aware of issues in these areas of the home, you can answer "no." There's no need to commission professional inspections or conduct tests.

What Information Is Deliberately Omitted From New Mexico's Disclosures?

Certain pieces of information are explicitly excluded from disclosure. N.M. Statutes § 47-13-2 notes that a seller won't be liable for failing to disclose the fact or suspicion that the property has been the site of a natural death, a homicide, a suicide, an assault, a sexual assault, or any other crime punishable as a felony.

Moreover, home sellers in New Mexico have no duty to disclose whether the property was owned or occupied by someone who was exposed to, infected with, or suspected to be infected with the human immunodeficiency virus (HIV).

The purpose of these carveouts is to prevent the real estate market from being clouded by irrelevant pieces of information. Still, you should realize that buyers might ask these questions. If news stories about your property can be found online or from other public sources, for example concerning a murder committed there, you might want to be prepared with an answer, or to decline to answer. (Never lie.)

Federal Law Also Makes Sellers Responsibility for Disclosing Lead-Based Paint Hazards

The federal Residential Lead Based Paint Hazard Reduction Act (42 U.S. Code § 4852d), commonly called Title X), tries to reduce the risk of lead poisoning in housing. If your home was constructed before 1978, it is likely to contain some lead, whether in the paint or pipes.

You will therefore need to take the steps described in Seller Responsibility to Disclose Lead-Based Paint Hazards.

Why Should You Be Honest and Open in Making Disclosures About Your New Mexico Home?

Sellers of homes in New Mexico and elsewhere feel a natural incentive to downplay the house's issues, and thus perhaps make insufficient disclosures.

But if you are not honest and open in your disclosure statement, there's a good chance that the buyer might find out about the problems upon hiring a home inspector. If you appear to have hidden the problem, this will lead to a serious trust issue, which could undermine the sale.

Moreover, you could face future legal liability. For example, imagine that on your disclosure form, you claim that there is no issue with your home's 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 will 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 with the specific purpose of inducing another person to act, resulting in injury to that person. Your misrepresentation—that you did not know about an obvious defect—could expose you to liability. At a minimum, it could trap you in costly and time-consuming litigation when you would like thoughts of your old home to be behind you.