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TABLE OF CONTENTS
- LISTING PROPERTY FOR SALE
- PROPERTY CONDITION, INVESTIGATION & DISCLOSURE
- Seller’s Common Law Disclosure Duties
- Seller’s Property Disclosure Statement
- Professional Home Inspections
- Defective Products and Materials
- Repairs and Remodels
- Sewer and Septic Systems
- Well Flow Tests
- Underground Oil Storage Tanks
- Environmental Hazards
- Smoke Alarms
- Carbon Monoxide Alarms
- Deaths, Crimes and External Conditions
- DOCUMENT INSPECTION AND INVESTIGATION
This Advisory is designed to assist home sellers in meeting their obligations as a seller of real property in
LISTING PROPERTY FOR
Listing agreements contain important terms regarding how the property will be marketed, the asking price for the property, the obligations of both broker and seller, the duration of the listing, the broker’s compensation and other terms and conditions. Many listing agreements contain what are called “liquidated damages” clauses. Such clauses should be read carefully as they establish the damages that may be due the broker if the seller terminates the listing agreement without cause. Most listing agreements have a provision that determines how any forfeited earnest money will be distributed between seller and broker. Sellers should carefully read the listing agreement and go over its terms with their broker before signing.
A multiple listing service, called an “MLS,” provides information to real estate professionals who subscribe to the service about properties that are for sale in the area. Filing a listing with the MLS exposes the property to active real estate professionals in the local area. As such, it is a powerful marketing tool. The MLS is also a way for listing brokers to offer compensation to other brokers who may know of a suitable buyer. This cooperative feature of the MLS allows the listing brokers to share part of their commission with a buyer’s agent. It is the ability to attract buyers through their agents that makes the MLS such an effective marketing tool.
MLS data and remarks are a form of advertising and, as such, must be accurate and truthful. Seller should, therefore, review MLS data and remarks for accuracy and bring any discrepancies or concerns to the attention of their agent. If personal property such as refrigerators, other appliances, furniture, tools, implements or accessories is listed as “included” in the MLS data, they become part of what is being offered for sale. It is like advertising that a car being sold includes floor mats. Once such items are advertised as “included,” the seller cannot unilaterally change their mind without risk of legal liability even if the items are not specifically listed in the contract for sale.
Selling real property involves a certain amount of expense. The seller’s exact costs and expenses depend on the property being sold and the terms of the transaction. Sellers should anticipate these expenses and plan for them at the time they list property for sale. Although accounting, financial consulting and tax advice are beyond the scope of a real estate licensee’s expertise, the seller’s real estate agent can help the seller estimate some of the costs and expenses that will be associated with the sale.
Seller costs and expenses include everything from moving expenses to the mortgage pay-off. Certain transaction costs, called “closing costs,” are typically paid by the seller. These include title insurance, escrow fees, legal fees, recording fees and the like. Most real estate contracts have provisions for seller-paid repairs that are identified during the buyer’s inspection of the property. Depending on the market and other factors, the seller may agree to pay some of the buyer’s closing costs. Such payments from seller to buyer are called “seller concessions.” Typically, at the time of closing the seller will pay any sales commissions agreed to in the listing agreement.
The sale of real property can generate tax liability at the local, state and federal levels. Although unusual in
Income from conveyance of real property located in
A seller in
Given the consequences, any doubt about disclosure of potential defects should be resolved in favor of disclosure. For instance, if the roof leaked last winter and was repaired it would be wise to disclose the leak and repair in a sale taking place the following summer. That way, if the repair proves inadequate during the next rainy season, there will be no question that the sellers mislead the buyer by “hiding” the leak and repairs. At the same time, a problem fixed years ago that has caused no further problems would not need to be disclosed. Where the line is drawn in a specific instance is a matter sellers should discuss with their real estate agent.
Real estate licensees are not property inspectors or legal experts. They can, however, assist sellers in understanding and meeting their disclosure duties. All real estate licensees in
A copy of the statutory disclosure form can be found online at: http://www.leg.state.or.us/ors/105.html Unless the seller qualifies for one of the narrow exclusions contained in the statute, or the buyer is not purchasing the property for his immediate family to live in, the completed disclosure form must be delivered to every buyer who makes a written offer on the property. If the seller fails to comply with the statute, the buyer is entitled to revoke their offer at anytime prior to actually closing the sale. If the seller does deliver the disclosure statement, the buyer’s ability to revoke is limited to five business days after delivery.
The exclusions available under the statute are listed on the first page of the disclosure form. They include the first sale of a dwelling never occupied, sales by financial institutions, sales by court appointed receivers, trustees, personal representatives and the like and sales by government agencies. All other sellers of residential real property being sold as a residence for the buyer or their immediate family must answer the two and half pages of questions the legislature has determined are relevant in the purchase of residential property.
The disclosure statement questions may be answered “yes,” “no,” “unknown” or in limited circumstance “NA.” Answering “unknown” to avoid disclosure of known information can be considered a form of fraud. A number of questions, if answered “yes,” require that an explanation or copy of a report or other document to be attached to the disclosure statement. Because the disclosure statement must be filled out by the seller based on the seller’s actual knowledge at the time of disclosure, real estate licensees cannot fill out the form for the seller or influence the seller’s answers in any way. Real estate licensees are, however, required to make the seller aware of the seller’s disclosure duties under the statute.
Most real estate licensees in
Real estate contracts in common use in
Should a transaction fail because of an inspection report, the seller will usually have the contractual right to demand a copy of the inspection report the buyer is relying upon. It is a good idea for the seller to demand the report so there will be no question that the seller deliberately turned a blind eye to potential problems. Under the seller’s property disclosure statute, any professional inspection done within three years of the date of the disclosure must be disclosed. The disclosure is one of those that require additional explanation or documentation. This provides the seller with a vehicle for disclosing the deal fail and the inspection report to eliminate any later claim the seller tried to hide the true condition of the property from the next buyer.
In anticipation of selling the property, some sellers will have a professional inspection done and any required repairs made prior to marketing the property. If the seller decides to hire an inspector, they should carefully review the inspector’s proposal to determine the scope of the inspection. Some home inspectors may not inspect heating and cooling systems, the roof or other systems or components. A home inspection should be done by a home inspector or contractor licensed by the Oregon Construction Contractors Board (CCB).
Inspector requirements and standards of practice for inspectors are available on-line at:
http://www.oregon.gov/CCB/home_inspectors.shtml.The license status of home inspectors can be checked at: https://ccbed.ccb.state.or.us/ccb_frames/consumer_info/ccb_index.htm.
Inspection of property is beyond the scope of expertise of a real estate licensee, but real estate licensees can provide sellers with a list of local inspectors. Licensees ordinarily will not recommend a specific inspector. Before h
Some materials used in home construction have been subject to a recall, class action suit, settlement or litigation. These materials include modern engineered construction materials used for siding, roofing, insulation or other building purposes. It is critical that a seller carefully review any notices, settlements or other information they may have received regarding such materials. The seller’s property disclosure statement contains several questions about such materials.
Homes may also contain products in their systems or fixtures that are, or have been, subject to a recall, class action suit, settlement or litigation. Plumbing, heating and electrical systems, among others, may contain such products. It is critical that a seller carefully review any notices, settlements or other information they may have received regarding such materials. If there is any doubt about systems or fixtures, the seller should arrange for a suitable inspection. A real estate licensee can often help the seller find an inspector with the proper knowledge and credentials, but inspection of property for such products is beyond the scope of a real estate licensee’s expertise.
If repairs or remodeling have been done on the property, the seller will want to make certain the work was properly done and permitted. Buyers will often ask the seller for any invoices or other documentation for obvious repairs or remodels. Sellers should, therefore, anticipate questions about any recent repairs or remodels and be ready to demonstrate they were done properly with the required permits.
A real estate licensee can help the seller assess the need to demonstrate building code compliance, but do not themselves have the training or expertise to evaluate building code compliance issues.
If repairs or remodels have been completed very recently, the seller should make sure no construction liens have been or will be filed against the property. Construction valued at $50,000 or more done within three months of a sale may trigger additional requirements under the Homebuyer Protection Act. A complete explanation of the Act and its requirements for sellers is available from the Construction Contractors Board at: https://ccbed.ccb.state.or.us/WebPDF/CCB/Publications/HPAform.pdf.
If any repairs are required during the transaction, the seller should make sure a licensed construction contractor is doing the repairs.
Sewer and Septic Systems
Whether the property is connected to a city sewer, septic system or other on-site wastewater treatment system is important information. The condition of such systems can be highly material in a real estate transaction. Real estate licensees are not licensed to do plumbing or septic inspections. If the property has a septic system or other on-site wastewater treatment system, the seller should consider inspection by a licensed septic system installer or other on-site wastewater treatment system professional prior to marketing the property.
Specific information about septic systems and other on-site wastewater treatment systems is usually available from the county. Buyers will often check with the county as part of their due diligence when purchasing property with an on-site wastewater treatment system. Sellers can avoid potential transaction problems by checking permitting and system status with the county prior to marketing.
If domestic water for the property is supplied by a private well, the seller is required by state law to test the well for total coliform bacteria, arsenic and nitrates. Sellers may also want to have the well tested for other potential contaminants. Proper procedures need to be used when testing domestic wells. More information on this state law requirement can be found at: http://public.health.oregon.gov/HealthyEnvironments/DrinkingWater/Monitoring/Pages/dwtfaq.aspx.
If domestic water is supplied by a private well, the seller will want to make certain the well provides adequate water for domestic needs. It is strongly recommended that a well flow test be conducted prior to marketing of any property that depends on a well for domestic water. Careful attention should be paid to disclosures or representations about wells. The seller should not allow the buyer to rely on a test done for the seller. The buyer should be advised to contract and pay for their own well flow test.
Sellers should review any well records they may have as buyers will usually ask to see such records. Interested sellers can obtain more information about well logs at: http://apps.wrd.state.or.us/apps/gw/well_log/well_log_faq.aspx. To access the well log database online, visit: http://apps.wrd.state.or.us/apps/gw/well_log. While real estate licensees are not trained and do not have the expertise to test wells, they should be able to direct the seller to the appropriate well professionals. Disclosures and disclaimers regarding domestic wells are common in real estate transactions and should be reviewed with the seller’s agent as part of contract negotiations.
Sellers should be aware of potential problems associated with underground oil storage tanks. Such tanks can cause serious problems if they have leaked oil. Underground oil tank leaks can create serious potential liability for sellers even if they do not know of the leak. Oil storage tanks, including home heating oil tanks, are closely regulated in
A seller who knows or suspects that property has an underground storage tank should take appropriate steps to protect his own interests, including seeking information from the Department of Environmental Quality (DEQ) and, if necessary, consulting with an environmental hazards specialist or attorney. SELLERS ARE ADVISED TO HIRE APPROPRIATELY TRAINED ENVIRONMENTAL PROFESSIONALS TO INSPECT THE PROPERTY IF AN UNDERGROUD OIL STORAGE TANK IS FOUND OR SUSPECTED.
Oil storage tank inspection, decommissioning and cleanup requires a special license from DEQ. A list of licensed providers can be found at http://www.deq.state.or.us/lq/pubs/docs/tanks/hot/LicensedServiceProviders.pdf. Inspection, decommissioning and cleanup of oil tanks can take time. Sellers who are aware of the existence of a tank should, therefore, begin the process early to avoid transaction delays. Real estate licensees are not trained or licensed to provide advice or services regarding underground oil storage tanks, but can assist the seller in finding the proper professionals.
Environmental hazards include everything from expansive soils to landslides to forest fires, tsunamis, floods and earthquakes. Environmental hazards can also include indoor air quality (e.g., radon or carbon monoxide) and hazardous materials, like asbestos. Environmental hazards known to the seller must be disclosed to all buyers. Sellers in doubt about such hazards should check with the county in which the property is located.
Wildfire is a concern in some areas of
If flood status is an issue because of insurance restrictions, claims or past history, the seller should bring the matter to the attention of their agent and be prepared to make the appropriate disclosure to buyers. Flood plain maps and information are available at: http://www.fema.gov/business/nfip/mscjumppage.shtm. Real estate licensees do not have the expertise to assess flood potential but can often direct sellers to the appropriate local authorities.
If environmental issues have been a problem in the area, or the seller has any notice of potential problem with air quality, ground or water contamination or other problems with the area or property, the seller should bring the matter to the attention of their agent and carefully consider disclosure obligations to potential buyers. If in doubt about potential hazards, the seller should visit the Environmental Protection Agency (EPA) website at: www.epa.gov/iaq/iaqinfo.html.
The Oregon Department of Environmental Quality (DEQ) has developed a statewide woodstove program to promote the use of cleaner-burning woodstoves and to help homeowners with woodstoves burn wood more efficiently and with less pollution. Under
Individual communities in
Inspection of fireplaces and woodstoves requires special training and expertise. Although a real estate licensee may be able to help you find a local woodstove professional, they cannot themselves inspect or evaluate a woodstove.
Molds are one of a variety of biological contaminants which can be present in human structures, including in residential housing. Mildew is perhaps the most common and best known of the molds. Less well known, and far less common, are certain molds identified as possible contributors to illness, particularly in people with allergies. Serious mold problems usually involve property with defective siding, poor construction, water penetration problems, improper ventilation or leaking plumbing.
In a few cases, these problems have led to the growth of molds which caused medical conditions in some people. Sellers who have any knowledge or notice of molds in their property should arrange for inspection by a qualified professional.
Inspection, discovery and evaluation of specific water intrusion or mold problems requires extremely specialized training and is well beyond the scope of a real estate licensee’s expertise. Sellers are, therefore, advised to hire appropriately trained professionals to inspect the property if the seller is concerned about the possibility of harmful molds. Any mold condition, whether believed harmful or not, should be disclosed to your agent and any potential buyer.
In Oregon, no person may sell a dwelling unless there is installed in the dwelling unit an approved smoke detector or smoke alarm installed in accordance with the rules of the State Fire Marshall. Because of this state law requirement, most residential real estate sale forms contain a representation by the seller that, at the earlier of possession or closing date, the dwelling will have an operating smoke detector as required by law. Sellers should anticipate the smoke alarm requirement and make sure their property is properly equipped prior to marketing the property.
Battery operated ionization smoke alarms sold or used in
Real estate licensees are not trained in building code or fire code compliance. If there is any doubt about whether a smoke alarm or detector system complies with building and fire code requirements, a licensed home inspector, or the home alarm or detector company, should be contacted. Your real estate agent may be able to assist you in finding the right code compliance professional.
Effective April, 2011 any person transferring a one or two family dwelling or multifamily housing (additional rules apply to rental property) that contains a carbon monoxide source (heater, fireplace, appliance, or cooking stove that uses coal, kerosene, petroleum products, wood or other fossil fuels that emit carbon monoxide as a by-product of combustion, or has an attached garage with an opening that communicates directly with a living space) must provide a properly functioning carbon monoxide alarm(s) installed at the location(s) that provide carbon monoxide detection for all sleeping areas of the dwelling or housing. The alarm(s) must be installed in accordance with the rules of the State Fire Marshall and in accordance with any applicable requirements of the state building code. Information about carbon monoxide alarms and detector requirements in Oregon can be found on the State Fire Marshal’s web site at: http://www.oregon.gov/OSP/SFM/CommEd_CO_Program.shtml
A purchaser or transferee who is aggrieved by a violation of this requirement may bring an individual action in an appropriate court to recover the greater of actual damages or $250 per residential unit (plus fees, including attorney’s fees). Violation of this requirement does not invalidate any sale or transfer of possession. Actions for violations must be brought within one (1) year of the sale or transfer of possession.
Because of this state law requirement, most residential real estate forms will contain a representation that, at the earlier of possession or closing date, the dwelling will have an operating carbon monoxide detector as required by law. Sellers should anticipate the carbon monoxide alarm requirement as it is also included on the new seller’s property disclosure form.
Real estate licensees are not trained in building code or fire code compliance. If there is any doubt about whether a carbon monoxide alarm complies with the building or fire code requirements, a licensed home inspector, or the alarm company should be contacted.
Deaths, Crimes and External Conditions Facts that would be subject to disclosure but for the statute include the fact that the property was the site of a death, crime, political activity, religious activity, or any other act or occurrence that does not adversely affect the physical condition of, or title to, real property, including that a convicted sex offender resides in the area. Although the seller is not required to disclose such facts, they may elect to- for instance disclosing a pedophile living next door to buyers with small children. Under
Facts that would be subject to disclosure but for the statute include the fact that the property was the site of a death, crime, political activity, religious activity, or any other act or occurrence that does not adversely affect the physical condition of, or title to, real property, including that a convicted sex offender resides in the area. Although the seller is not required to disclose such facts, they may elect to- for instance disclosing a pedophile living next door to buyers with small children. Under
Neighborhoods change over time. Some of these changes can affect the value or desirability of property. Building permits, zoning applications and other planning actions are a matter of public record and notice. Any notice of planning actions in the area, or even knowledge of future plans by neighbors or the government, that the seller has should be discussed with their real estate agent to determine what, if any, disclosure should be made to buyers.
Location within a school district can be an important attribute of a neighborhood. School boundaries, however, are subject to change. If location within a particular school district is going to be advertised to attract buyers or justify the asking price, the seller should investigate the boundaries and the likelihood of change by contacting the school district directly. Oregon law provides a “just compensation” right for some Oregon property owners if a public entity enacts or enforces a land use regulation that has the effect of reducing the value of the property. Sellers who believe the value of their property is affected by Oregon’s property compensation laws are advised to seek the counsel of appraisers, attorneys or other land use professionals.
Homeowners who do their own work in their own home are exempt from RRP rules. EPA does, however, urge homeowners to read EPA's Renovate Right: Important Lead Hazard Information for Families, Child Care Providers, and Schools. Homeowners can also call the National Lead Information Center at 1-800-424-LEAD (5323) for more information or visit EPA’s website at: http://www.epa.gov/lead/pubs/renovation.htm
The newest version of the Historic Property Tax Benefit Program not only reduces the benefit from 15 to 10 years but provides increased accountability on owners. Additionally, the law allows for a second 10-year renewal of the benefit so long as the local government has not passed a resolution prohibiting the renewal. The lack of a renewal of the special assessment or failing to comply with the requirements and deadlines contained in the law could result in the loss of the special assessment and a substantial increase in the new owner’s property taxes as well as potential fines. More information on the Historic Property Tax benefit Program including statutes, rules and applications here. http://www.oregon.gov/OPRD/HCD/SHPO/tax_assessment.shtml.
Buyers should carefully review closing documents and inquire into all requirements of the Historic Property Tax Benefit Plan when presented with a Historic Property Addendum. Real estate licensees are not trained or licensed to provide tax advice.