Do you have the seller fill out a seller disclosure form?

Question

In doing your wholesale deals, do you have the seller fill out a seller disclosure? It states in my P&S Agreement that the property is being sold "as-is." Does this negate the need for the disclosure? Being a realtor, I know that this form is always to be filled out, but I'm thinking this is just to conform to real estate commissions guidelines for brokers and agents. In that respect, I guess the quesiton is: Do FSBO properties require a seller disclosure?

Michael Quarles · Answer

For the longest time I would have the seller sit and fill out all of the disclosures in my office. In California although only a TDS, lead and Megans law are required we had all of the "Realtor" disclosures, which are a large stack of documents filled out by the seller as well.

However now I dont have them sign any. Its not my job. And if a seller doesnt give me a TDS I could, if needed, use the non disclosure to resend a deed. Not that I have, I  just like having that option.

Also I like Not having disclosure on a transaction. So not receiving the disclosures helps I think when I have to disclose on a sale.

Nothing worse then forgetting to disclose a sellers disclosure on a resell as the selller.

Ryan Webber · Answer

In Texas, a Seller's Disclosure is required with some exceptions.  The penalty for not providing one is that the Buyer can rescind the contract right up to the day of closing.  So I follow a similar idea of Michael's.  I don't ask for one, so technically it would give me an out (though I've never used it either).

If you are assigning the property, though, I would guess that this right of rescission would carry through to your buyer so beware.

Most of the time when I'm doing a double closing, I will provide one to my buyers.  This eliminates their right to back out and decreases my liability.  Its usually pretty empty but I'll put everything I know about the property on there.  And whether I give my buyer a written disclosure or not, I always verbally disclose EVERYTHING I know about the property to my buyers.  My business model is based around an investor walking into a total piece of crap house with eyes wide open.

Ryan Webber · Answer

Yes, I provide the Lead Based Paint Disclosure when I sell but I don't when I'm buying.

I had a scare one time with the Lead Disclosure.  It was a 10 house package deal and I got a call 6 months later from the Buyer of one of the houses saying that the city was making him remediate the dirt around the garage, which I didn't even know you could remdiate dirt.  While the last owner had it, the house had been cited by the city as having hazardous levels of lead near the garage.  If he wanted to sell it on one of the cities down payment assistance programs, he had to do several thousand dollars of dirtwork.  I shared with him that I had no idea about it and that I was sorry.  I gave him the contact information of the seller, but I think he just ended up eating it.  I don't think I would have had any legal liability, but it did concern me nonetheless.

Jerry Kisasonak · Answer

Ryan Webber  Are you following the same steps for the lead paint disclosure?

Jerry Kisasonak · Answer

J  Scott Steve Babiak Michael Quarles  Thanks for the replies. I just sat down with a 72 year old seller this evening and had her fill out a seller disclosure for a wholesale deal I'm working on. Our standard PA Multilist disclosure is 6 pages long with fine print... almost too small for anyone over 65 to be able to read without great strain. Anyway, after about 1 hour she finally got through it. Then I got out my P&S Agreement and she was so tired of reading she just asked, "Where do I sign this one?"

I liked Michael Quarles rebel answer... he's always pushing the envelope (pun intended). It really is the sellers responsibility to produce the disclosure. And if they don't it's not our responsibility to tell them that they need to because it's the law, unless, of course, you're representing them as an agent. I did feel like I had my realtor's hat on tonight by giving my seller that form to fill out. That's probably a mistake because I'm not respresenting her, I'm the buyer/wholesaler in the transaction. Additionally, I'm not an attorney. What's more, I already have an end-buyer lined up who gave me the green light, but putting the seller's disclosure into the mix can only make his mind change in one direction from this point. I'm assigning the deal, so he'll see every document in the deal.

I think in the future I'm going to follow a Don't ask - Don't advise policy. One of the reasons that I'm wholesaling to begin with is to get away from the 30 pages of bs that's commonplace in a brokered RE transaction... most of which is fear-based CYA ramblings. Call me old fashioned, but I love good eye contact and firm handshake to cement a deal. The paperwork, in my mind, is a formality.

Steve Babiak · Answer

In PA, unless there is an exemption (REO, estate sale, transfer to ex-spouse) then the seller is required by law to complete a specific disclosure that is given in the state law.  The realtors use a form that includes a number of additional items that are not required by the state law.  So, a FSBO sale requires a seller's disclosure, unless there is an exemption under the law.

http://www.portal.state.pa.us/portal/server.pt?open=18&objID=487575&mode=2

http://www.evictionsunlimited.com/nss-folder/1nocontent1folder/SELLERS%2520DISCLOSURE.pdf

http://dornish.net/seller-beware-of-pas-disclosure-law

http://www.pabulletin.com/secure/data/vol40/40-49/2309.html

http://www.phic.info/SB1032P2140.pdf

This same question came up a few days ago, and I answered there that I assist the seller in completing these in off-market transactions.

J Scott · Answer

In my state, seller's disclosures are not legally required, though they are standard.  Even on as-is sales, a disclosure is generally provided.