SELLING a Home in AZ Disclose??

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Selling a Home in AZ and Not Sure What to Disclose to the Buyer?

I recently received an email with this question about disclosure of sex offenders when selling a home in Arizona:

Recently in USA Today 3/20/2008 in an article written by Matt Reed, he stated  ” Arizona has one of the nation’s toughest laws, requiring sellers and agents to disclose neighboring sex offenders to potential buyers.”

Yet Arizona real estate law attorney Richard Keyt stated on his website the following: ” The presence of a sex offender in the vicinity of the property is not a fact that is required to be disclosed by law.”  His web page was last revised 3/23/2008.

Additionally, a form from the Arizona Association of Realtors, Residential Seller Advisory version 02/2008 stated: “By law, sellers are not obligated to disclose that the property is or has been: ( I’ll skip to paragraph 3: located in the vicinity of a sex offender.”

My question is has the governor or the legislation changed this provision of law recently? Who is correct?

First, I have to say that I’m not an attorney so I can only address this question in the general sense and from a Realtor’s perspective.  So do not consider my answer as legal advice, and ALWAYS consult an attorney for questions about your own specific situation.

Second, don’t believe everything you read in the mainstream media!  Of course, you can’t believe everything you read on the internet either.  But I do know bloggers who are much more thorough about checking facts than some of the major media outlets.

Arizona legislators are constantly updating our laws, and real estate disclosure is a hot topic.  However, I don’t think a change to the law is the source of confusion in this case.  From my experience, I’d say all of the sources quoted are technically correct.  I think this is the USA Today article that was referenced in the question, here’s the AZ real estate attorney who was mentioned, and here’s the Arizona Association of Realtors (AAR) Residential Seller Advisory form.

The AAR Residential Seller Advisory does indeed state, “By law, sellers are not obligated to disclose that the property is or has been… located in the vicinity of a sex offender.”  But if you keep reading, it goes on to say, “However, the law does not protect a seller who makes an intentional misrepresentation.”  And then the top of the next page says, “Sellers are required by law to disclose all known material (important) facts about the Property to the Buyer“.

So what is considered to be “material” or “important”?  Generally, anything that may affect a buyer’s decision to buy is definitely material and should be disclosed.  To be safe, I tell sellers that EVERYTHING is material to the buyer.  At least, a seller has to assume that everything is material because they don’t know what’s material to the buyer.  Every buyer is different… what seems minor and unimportant to the seller may very well be minor and unimportant to one buyer.  However, that same item may be extremely important, and thus material, to another buyer.  If it ends up in front of a judge, I would guess that anything and everything the buyers find out later, that the seller knew and didn’t disclose, will be considered material!

The AAR Residential Seller Advisory reinforces this idea with it’s heading, “When in doubt, disclose!“.  If the sellers know there’s a sex offender living down the street and the buyers ask, I would tell the seller to disclose it, in writing, to protect both the sellers and the buyers.  Even if the buyers don’t ask, I would still tell the sellers to disclose it, in writing.  It doesn’t matter if the buyers are older or don’t have kids.  You cannot assume they don’t care about a sex offender living nearby.  They may have grandchildren who visit and play outside, or friends that come over and bring their kids.  My point is, you shouldn’t try to get inside the buyer’s head and figure out what is, or is not material.  Only the buyer can decide that.  Just disclose it and let the buyers make that call… whether it’s a maintenance problem, or something you know about the neighbors, homeowners association, schools, etc.  Disclose whatever you know.

I know many people are reading this thinking, “Disclose it, even if it they don’t ask? That would probably kill the deal.”  Well, it’s better to kill the deal now than end up in court later.  And actually, being honest from the beginning by making full disclosure reduces the risk of a last minute deal-breaker, 29 days into the transaction.  As a seller, if the deal isn’t going to close, don’t you want to know right away instead of AFTER your house has been off the market for a month?

Full disclosure isn’t just for sellers either.  It’s a two-way street.  Buyers should also disclose anything that might be material to the sellers, like if they know something which may affect their ability to qualify for a mortgage.  The “golden rule” can (and should) be applied to real estate transactions, just like anything else in life.  Every transaction is smoother, less stressful and turns out better in the end if both parties are honest and upfront with each other from the beginning.

But buyers, don’t be naive!  You should NOT rely on the sellers to disclose all material facts about the property you’re buying.  Even if the sellers are honest people, they may not know all the material facts.  So buyers must also do their “due diligence” by investigating everything that’s important to them.  The AZ Department of Real Estate advises buyers to read and investigate the items on this checklist for Arizona home buyers.  While the law may require certain disclosures, “Buyer Beware” is a reality!

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