In this Legal Breakdown video, IAR Legal Counsel Gabe Walsh sits down with IAR Instructor and Attorney Jorge Gomez, Jr. to discuss the issues of seller disclosures, and, more specifically, the issue of seller disclosures when a seller has never lived in the property.
If you prefer to read this information, you can scroll below the video to read the transcript of the video.
Hello, Iowa Realtors, we’re back with another Legal Breakdown video as part of our series Disclosure, Duties and Dilemmas. George, the topic we're going to talk about today, we're going to start with this question. Have you George, in all your years of practice ever had somebody tell you, well, you know, I don't need to deliver a seller disclosure statement because I've never actually lived in the property.
Yes. Gabe many, many, many times. Yes. And more recently, more times. Yes. You know? Yes. Um, the way the market is now, I find a lot of people buying property and flipping property. They buy it and they, and for a month or weeks or whatever they renovate it. Comes time to sell. They have the seller disclosure. I don't need to fill it out. Yes. Put an X through it, whatever. And they feel that they don't have that obligation. That's where the issue comes from.
Well, if you've ever found yourselves in one of those situations or heard that or ever wondered, man, if I haven't lived in the property, if I'm just flipping it, if it's just my rental property, I've never lived in it. Do I, do I need to fill out a disclosure? Can I just put an X through it? If you have ever considered that question, you need to hear what we're about to say today. Be careful!
There was a case, George, there was a case in Iowa. Well, to tell you a few facts of this case, essentially, there was a, a real estate agent who was an agent for 33 years. That happened to own several rental properties. Okay. One of those rental properties went to go listed. Okay. And as they're going through the walkthrough of this property, uh, this person whose rental property, this was the listing agent, you know, points out, Hey, we've got a little bit of an issue here, a little bit of an issue. There points out a few things. Uh, but just a few issues. Right? And, when they go to deliver the seller disclosure statement, essentially what this listing agent did was placed a large X over the text of the seller disclosure form and wrote sellers never lived in the property, right? The theory was, we've never lived in this property.
We don't know anything about it. We are just going to put an X through the seller disclosure form. Okay. Well, buyer ends up purchasing the house and uh, when they purchase this house, there's all kinds of issues that unfold, right? Wet spots within six months on the basement, walls and floors. I believe we're talking about mold issues. We're talking about inches of water in the basement. Eventually water started to penetrate the, the walls and the main floor, the home, um, come to find out that there was a septic tank that was buried outside sewer line issues, all these issues, George, they find out after this property had transferred. Right. And of course, what did they do? They sued the listing agent.
Of course, they're going to do that. I'm kind of surprised with 33 years in the business.
Yes.
Didn't feel that, that they needed to fill out a disclosure. Well, actually in this case, what's interesting is according to the case, the listing agent or somebody testified that they had learned at some point or thought they had learned that it was customary in the industry to just put an X through a seller disclosure, they didn't learn that in your class, did they?
No, they did not learn that in my class.
Certainly not in my class either. Right. When you go to 558A there is nothing that says that if you haven't lived in the property, you are exempt. It says that you have to a duty to disclose any actual knowledge of any material issues, you know, about the property or make a reasonable inquiry to obtain the information. Right.
What, what if there were issues that occurred prior that you've been made aware of, but they've been remediated.
Yes. And that's interesting too, because if you remember from a previous video that we did about a year ago, a whole year ago, we talked about that snake case, right. Where there were a bunch of snakes in the house and that was Wep versus Robinson, Robinson versus Wep. And essentially what that case stated was that you do have an affirmative duty to disclose any knowledge you have about past issues with the home. So you can't say, well, it might have been an issue two years ago. It's not an issue now. So I'm not going to disclose. You need to disclose any information that you know about that property. If it was an issue in the past, you have an obligation to disclose it.
Yes. Again, there's another case, that I remember recall where the agent did not inform their client, their buyer client, that the disclosure was not fully completed. Right. And, you know, later on, there was an issue with it.
They have an obligation to make sure that's completed. Absolutely. You're never filling out that form for a client. No, never. You're never putting pen to paper or anything like that, but Hey, you know, it looks like something is not quite filled out on here or as a buyer's agent, there shouldn't be an X, let's see why they're not disclosing this. Let's ask them some more about that. Let's ask them to update this. Exactly. So I think those are the key takeaways, right? That you, you don't just put an X through it. You have an obligation to disclose what you know. People who are flipping houses, people who are selling rental properties, you need to be aware, even if you have not lived in the property that does not in and of itself exempt you from filling out a disclosure.
Exactly. Good faith and honesty.
Okay. Awesome. Great topic.
Disclaimer: This video and transcript is intended to be an education resource for Iowa REALTORS®. The information in this video discusses general legal information and is not intended as legal advice or a substitute for legal advice. Every situation involving areas of the law, such as the areas discussed in this video, are sensitive to the particular facts of your case. The law is always changing, and changes in the law may occur while this video remains online. It is for all these reasons that you are advised not to rely on the information in this video for any legal questions you are facing. Instead, it is imperative that you consult a lawyer of your own choosing if you ever have legal questions related to the topic discussed in this video.