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As a home seller, do I have to mention that ceiling leak?

Updated: Sep 16, 2020

You have decided it’s a good time to take the leap and put your home on the market. You have organized the closets and cabinets, cleaned the carpets, and even had that water stain from the leaky ceiling painted and refreshed. Your home is now ready for showings.

Once you have received an acceptable offer, you, as Seller, and Buyer will enter into a purchase agreement containing important terms and conditions of your real estate transaction. It must be in writing and signed by Seller and Buyer and includes the offer, acceptance of the offer, sales price, and an adequate description of the property. Following your signature on the agreement, you will be required to make certain disclosures to the Buyer about the physical condition of your home, and that of the entire property.

The required disclosures are not meant to serve as a warranty or be in place of a professional inspection. The purpose is to put the Buyer on equal footing with the Seller during negotiations. Also, the disclosures give the Buyer very important information about the property that they may not necessarily become aware of just by a visual inspection (remember that leaky ceiling that you painted over?) Most importantly, the disclosures give the Buyer beneficial knowledge of what the current owner encountered while living there or might arise in the future due to existing concerns.

So what are material defects?

Material defects are conditions that would have a substantial adverse effect on the value of the residential property or that would significantly impair the health or safety of future people living in the property. For example, material defects could include cracks in the foundation, unsafe drinking water, flooding, issues with the HVAC or plumbing, disputes with neighbors over boundary lines, past meth lab use, and termite infestation.

Defects that are not material do not need to be disclosed. These may include things that detract from the aesthetics or prevent a system from functioning at its peak efficiency, but it won’t cause any harm. Sometimes, it may be difficult to ascertain whether the defect is material, yet it is in your best interest to report any questionable defect in order to avoid liability in the future.

It is important to note, however, you do not have to engage in any inspection of the property to determine if there are any material defects. The Seller must report material defects that they have actual knowledge of when completing the Report and if the Seller later learns of a material defect, they must inform the Buyer as soon as possible and provide a Supplemental Disclosure.

Can Seller and Buyer agree not to make the disclosures and purchase the property “As Is?”

Unfortunately, not. The Buyer and Seller cannot agree to ignore the disclosure requirement, even if Buyer signs a contract agreeing to purchase the property “as is” (in its current condition), nor if the Buyer already knows about the defects. You, the Seller, must make disclosures regardless, even if the property is a tear-down; unless it is uninhabitable as a residence at the time of the sale. (See the case of Grady v. Sikorski, 349 Ill. App. 3d 774 (Ill. App., 2004).)

What are the legal consequences if Seller does not deliver a truthful disclosure report?

There are many risks and penalties if you fail to deliver the Report. One example would be where the Buyer elects to terminate the contract at any time before closing. Even worse, if you knowingly deliver a disclosure that is incorrect or incomplete, you could be held liable for making false statements or fraud, resulting in you owing the Buyer actual damages, court costs, and attorney’s fees.

Making sure that you, as Seller, provide an accurate, truthful, and timely Report is essential to fulfilling your disclosure requirement. Let an experienced attorney protect your rights and interests during the property selling process so that you can experience a successful home sale.

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