Imagine that you own a house, condominium unit, or parcel of land in Washington State, and that you want to sell it. Washington law requires that, before you actually make the transfer to a buyer, you first give that potential buyer a disclosure statement. This disclosure is intended to put the buyer on notice of any known defects with the property. A defect could be anything from a lack of hot water to a broken toilet. Making these disclosures prevents the buyer from having an unfortunate surprise before or after the closing. If you’re selling property in the Evergreen State, what must you disclose, and how?
Washington Code § 64.06 et seq. broadly covers disclosure requirements for home sellers in Washington State. In the sale of residential property, the seller must "deliver to the buyer a completed seller disclosure statement….” This requirement applies not only to direct sales, but also to exchanges of land (for example, if you trade one condominium for another) and leases where the lessor has the option to purchase (for example, if you lease your home to someone for one year, and the lease gives that person the option to buy after that one-year period has concluded).
You must, under Washington Code § 64.06.030, deliver the disclosure statement to the buyer within five business days of you both having signed the agreement to purchase the property. The buyer then has three business days to either accept the statement and move ahead with the transaction, or rescind (cancel) the purchase agreement. The statute makes it clear that this decision “may be made by the buyer in the buyer's sole discretion.” In other words, within that three-day period after receiving your disclosures, the buyer can escape the signed sales contract without penalty. But if the buyer does not give you written notice of rescission within three business days, “the real property transfer disclosure statement will be deemed approved and accepted” and the sale will move forward.
What, exactly, do you need to disclose? Washington’s legislature is extremely specific about the required disclosures. Washington Code § 66.06.021 shows the entire disclosure form that you need to fill out. The form contains a few dozen questions, which you can answer with “Yes,” “No,” or “Don’t Know.” These concern various aspects of the home, ranging from your legal title (for example, whether any contractors have placed liens on the home) to the condition of the plumbing system (for instance, whether the outdoor sprinkler system works). Remember, you are required only to check “Yes” or “No” if you actually know the answer to the question being asked. There is nothing wrong with checking “Don’t Know” if that is the truth of the matter.
Per Washington Code § 66.06.021, you are not required to do any research regarding the “actual presence, or lack thereof, of registered sex offenders in the area of any property.” You are merely required to disclose what you already know. Keep in mind, however, that the buyer may research public databases of sex offenders, if this is an issue of particular concern.
Washington is somewhat unique in that state law also requires you to disclose whether or not the property is in “close proximity to a farm.” This is apparently a way to warn buyers that they might be exposed to the sights and smells of agriculture, should they choose to purchase the property.
The Washington Association of Realtors has created a better-formatted version of the statutory questions, which isavailable online. Also speak with your own real estate attorney or agent to see whether he or she has a preferred disclosure form.
Any Washingtonian selling a property wants the transaction to go as smoothly as possible. You have most likely taken pains to make your home look perfect to prospective buyers, perhaps by painting the walls or mowing the grass. Won’t telling the buyer about defects undermine your efforts?
Yes and no. Undoubtedly, Washington buyers will take note of major defects that you disclose. And undoubtedly, this may influence the price the buyer is willing to pay for the home. But the legislation gives you important incentives to be fully honest.
First, if you disclose all of the defects within your actual knowledge and answer the questions honestly, the law protects you from future liability. Washington Code § 66.06.050 provides that: “The seller shall not be liable for any error, inaccuracy, or omission in the real property transfer disclosure statement if the seller had no actual knowledge of the error, inaccuracy, or omission.” Imagine that you aren't aware of any problems with your HVAC system. You therefore disclose nothing in response to the questions about heating and cooling defects. Then, after the buyer moves in, the HVAC system no longer seems to work. The buyer would not be able to successfully sue you for damages unless he could establish that you lied on your statement; that is, that you knew that there were issues with the HVAC and failed to disclose them. (The buyer might be able to prove this, for example, if there was evidence that you made frequent repairs prior to the property sale.) By the same token, if you do commit fraud or fail to make important disclosures, the buyer can sue you.
Beyond these fears of future litigation, the practical benefit of disclosure is simple: It creates trust. If you tell a buyer about a problem, he or she is more likely to want to do business with you. It shows that you are not trying to pretend that your property is flawless. Could this honesty lower the purchase price, or maybe even scare a buyer away? Maybe. But buyers know that homes aren't perfect. The experience of many real estate agents and sellers shows the such openness is more likely to lead to a smoother transaction, and mitigate the risks of litigation long after the closing.