What You Must Disclose Part 1

So you buy  an investment property. You are minding your own business doing your walk through and filling our your Property Repair Estimate Sheet.  All of a sudden, your nosy neighbor appears in front of you. He tells you how the place used to be so well kept and he is glad you bought it and is looking forward to what you do with the place. GREAT! You think, a positive neighbor. Then he continues to ramble on about the previous owners and you hear “ever since John’s suicide in the garage….” Wait…WHAT? 

Why was this not disclosed to you? Do you have to disclose this to your potential buyers? Reality is rules are different in each state. Here’s what we would suggest.

1. Death in the Home

DSC_0224Some buyers may have concerns or superstitions about purchasing a home in which someone has died, so it’s important to know if your state requires sellers to disclose a previous death in the home. Keep in mind each state will have slightly different requirements for disclosure. A seller is required to disclose deaths related to the condition of the property or violent crimes though. For example, if a previous occupant’s child drowned in the swimming pool because it didn’t have the proper safety fence, the seller would need to disclose the death even after remedying the safety issue by installing a proper pool enclosure. There are, however, circumstances where sellers do not have to disclose a death on the property.

There are no states in which there is an obligation to disclose the death of a person who has deceased under natural conditions though. But even when disclosure isn’t required – for example, Georgia does not require the disclosure of homicide or suicide – you may want to err on the side of giving the buyer notice of a death on the property. You would want to know, right?  Remember how you learned of the suicide? They will hear about it from the neighbors anyways.

2. Neighborhood Nuisances

A nuisance is a noise or odor from a source outside the property that could irritate the property’s occupants. If you are investing in North Carolina, that state requires sellers to disclose noises, odors, smoke or other nuisances from commercial, industrial or military sources that affect the property. Michigan requires sellers to disclose farms, farm operations, landfills, airports, shooting ranges and other nuisances in the vicinity, but Pennsylvania leaves it up to the buyer to determine the presence of agricultural nuisances.

3. Environmental and Natural Hazardshow big or small is the house?

If the home is at an increased risk of damage from a natural disaster or has known or potential environmental contamination, you may be required to disclose this information to the buyer.

Texas law requires sellers to disclose the presence of hazardous or toxic waste, asbestos, urea-formaldehyde insulation, radon gas, lead-based paint and previous use of the premises for the manufacture of methamphetamine. 

New York’s Property Condition Disclosure Act requires sellers to notify buyers about whether the property is located in a flood plain, wetland or agricultural district; whether it has ever been a landfill site; if there have ever been fuel-storage tanks above or below ground on the property; if and where the structure contains asbestos; if there is lead plumbing; whether the home has been tested for radon; and whether any fuel, oil, hazardous or toxic substance has been spilled or leaked on the property. 

 California’s Natural Hazards Disclosure Act requires sellers to disclose whether the property is in a seismic hazard zone and could therefore be subject to liquefaction or landslides after an earthquake. 

While most disclosure requirements are governed by the states, the federal government mandates one: the disclosure that lead-based paint may be present on any property constructed before 1978. 

Check in next week for What You Must Disclose Part 2!

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Erik Hitzelberger has been Real Estate Investor since 2007. While learning the ropes in the market down-cycle, he now teaches others how to use his systems and leverage other people’s expertise to achieve their own goals.

Erik Hitzelberger – who has written posts on Part Time REI.

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About Erik Hitzelberger

Erik Hitzelberger has been Real Estate Investor since 2007. While learning the ropes in the market down-cycle, he now teaches others how to use his systems and leverage other people's expertise to achieve their own goals.

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