North Sound Property News

Recently, real estate law in Washington state was significantly changed with regard to seller disclosures and buyer’s need to verify all information disclosed.  The burden now falls on the buyer to verify to their own satisfaction all information in the Seller disclosure, as no longer can a buyer sue a seller for negligent misrepresentation. 

 Once, if information disclosed in Form 17 (the Seller’s disclosure form) was found to be untrue, a buyer had the option of suing a seller for either negligent misrepresentation, or fraud.  Because it is easier to prove, most buyers went after sellers based on negligent misrepresentation (the failure to disclose a situation that a seller may or ought to have known about but failed to disclose because they forgot or thought the issue was fixed). 

 However, the recent case of Alejandre v. Bull has changed this.  Now, buyers no longer have the option of suing a seller for negligent misrepresentation, and their only legal recourse for a suit around Form 17 disclosure is if there is fraud (which is difficult to prove).

 The result of this is that it is now up to a Buyer to verify all facts contained in Form 17.  And, the buyer’s remedy in case of fraud must now be made part of the contract–buyers and sellers must negotiate whether a buyer will or will not be able to hold a seller liable for misrepresentations on Form 17.

 As a result of all this, Windermere’s legal department has written a memo for Windermere agents to distribute to buyers and sellers to help them understand their rights and obligations as regards disclosure.  I will post the section for buyers and sellers separately.  I think this is great information for both parties as it really helps clarify what each party’s responsibility is.

From the Windermere Legal memo:

 Seller disclosure is one of the most important parts of a real estate transaction. Sellers need to know what
information they are obligated to disclose, and Buyers need to understand their own duty of diligence and
investigation. This Memo is provided by Windermere’s attorneys as legal information. Real estate agents are not attorneys, and you should consult an attorney if you have any specific disclosure questions.

Information for Buyers

Most buyers expect far more disclosure from the seller than the law requires. Sellers have no duty to inspect their property or look for defects and may not even consider a condition a defect after living with it for years. Instead, Sellers have a limited duty to disclose material defects that substantially affect the physical condition of or title to the property.

Sellers have no duty to disclose neighborhood conditions or past events at the property. For instance, sellers have no legal duty to disclose the following conditions either at the property or in the neighborhood
• Murders, suicides, rapes or other crimes
• Ongoing criminal or gang activity in the neighborhood
• Registered sex offenders in the neighborhood
• Future development in the area
• Political or religious activities in the area

If these or similar matters are of concern to a buyer, then the buyer must include an inspection and “Neighborhood Review” contingency in any agreement and follow through with the inspection.

Washington law imposes a duty of diligence on the buyer to fully investigate the property and any information
provided by the seller. The buyer is charged with the knowledge that the buyer would have obtained with a diligent investigation. For example, a buyer who receives an inspection report identifying a possible defect has a duty to investigate further and may be barred from seeking compensation from the seller if the defect could have been discovered through further inspection.

Even in cases where a seller fails to disclose a material defect and the buyer exercises diligence, recent changes in the law may prevent any claim against the seller. The law now requires the parties to expressly provide in their contracts any remedies for negligent performance, including the negligent failure to disclose the condition of the property. The failure to provide a remedy for negligence is treated the same as agreeing to have none, meaning that the seller is most likely only responsible for fraudulent concealment. The form purchase and sale agreement now requires the parties to agree whether the buyer will have a remedy for seller negligence.

These are important changes, and it’s important for buyers to understand that they now must be much more diligent in verifying any information which has been disclosed.  Next time, I will include the information that it is important for sellers to know.

About the Author: Sandy Kaduce is a REALTOR (tm) with Skyline Properties NW who serves buyers and sellers in North King and South Snohomish counties. She is incoming 2009 President of the Mukilteo Chamber of Commerce, as well as Vice President of Site Selection for Habitat for Humanity of Snohomish County. For more information, visit Sandy on the web at www.sandykaduce.com! Read more from this author