We frequently are asked whether sellers are required to disclose prior whole house inspections. In 2003, the Oregon legislature made considerable headway in expanding what information must be disclosed to prospective home buyers. Most significantly, House Bill 515 revised the sellerís property disclosure statement, requiring, among other things, that a seller disclose prior whole house inspections completed within the last three years. This article will specifically address the sellerís property disclosure statement as it relates to prior inspections, and the importance of disclosing information obtained from such inspections.
Most frequently, brokers come into contact with the OREF form of a sellerís property disclosure statement. It is important to note that the contents of this disclosure statement are mandated by state law. Oregon Revised Statutes 105.464 stipulates the form and content of the sellerís property disclosure statement, allows a seller to respond to a question with “unknown,” and requires a seller to provide additional information for certain questions which are marked “yes.”
In paragraph 5, “Dwelling Structure,” a seller must disclose whether a whole house inspection has been completed within the last three years. If the seller answers in the affirmative, the disclosure statement indicates that a seller must attach a copy of the inspection report or a sheet explaining the inspection.
For various reasons, many sellers and their brokers do not share prior inspection reports. First, sellers may not possess inspection reports completed on behalf of potential buyers of the subject property. Second, some sellers and brokers may not want to share a prior inspection report because they do not want to kill a deal based on negative findings in an inspection report.
However, sellers and brokers should be prudent when determining whether to share prior inspections. First, the decision should not be made so as to conceal negative information about the property. Lack of disclosure of a prior inspection does not equate to lack of knowledge of material defects. Sellers are required by law to disclose known material defects, regardless of whether a prior inspection report is shared with a potential buyer.
Second, should a seller decide not to provide a prior inspection report, the seller should provide an adequate explanation to potential buyers as to the circumstances of the prior inspection(s), who performed the inspection(s), if known, and any negative information contained in the prior inspection report(s).
Sellers are best advised to provide potential buyers with copies of any prior inspection report(s) completed within the last three years, pursuant to the disclosure law. In doing so, they will avoid the inherent risk of misrepresenting the contents of an inspection report. A buyer may place more or less weight on a potentially negative item than a seller, and thus the seller should not decide what a buyer would want to know. However, if a seller is aware of prior inspection but does not possess the report, the seller need only explain this fact and any information regarding the prior inspection of which the seller may be aware. Brokers must be diligent in ensuring that their clients provide such an explanation as part of the sellerís property disclosure statement.
Sellers will most likely look to their brokers for advice as to whether to provide a prior inspection report to a potential buyer. In order to best serve their clients, brokers should speak with their principal brokers about the risks inherent in deciding not to provide potential buyers with prior inspection reports. The risks in failing to provide all relevant information, including a report, may outweigh the risks of losing a deal due to negative attributes of a property. For instance, sellers and possibly their brokers may be held liable for misrepresentation for failure to disclose known material defects discovered through prior inspections. Brokers must be proactive in ensuring that their clients are aware of their obligations to disclose information about prior inspections, and that they are providing all information required by the sellerís property disclosure statement.
This column contains general information only and must not be construed as legal advice.
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