John Fridlington – Triple win

A leaky faucet, a malfunctioning water heater, drafty windows – these are just some of the things a home seller might point out to real estate agents or prospective buyers when asked.

In about 30 states, sellers don’t have a choice because they’re legally required to complete forms or statements disclosing problems with their property. But Massachusetts home sellers are not required to sign such forms. Typically they reveal information only when specifically asked.

Should sellers in the Bay State be required to complete property condition disclosure forms? That’s a question that hasn’t been hotly debated since about a decade ago, when the National Association of Realtors initiated an aggressive campaign to get more of its chapters to push for mandatory disclosure for sellers.

Since then, there has been little mention of the topic in the commonwealth, according to real estate executives and industry leaders.

“We’re not aware of a strong push for mandatory disclosure,” said John Fridlington, executive vice president of the Massachusetts Association of Realtors.

And while the National Association of Realtors has pushed for mandatory disclosure, some Realtor groups are opposed to the idea.

“There’s no need for it,” said Ed Shanahan, chief executive officer of the Greater Boston Real Estate Board. “We do not have a situation where we need a government-mandated form.”

On the other hand, many advocates think having mandatory property condition disclosure is a “triple win” for consumers, both sellers and buyers, and real estate licensees or Realtors, said MAR’s Fridlington.

Mandatory disclosure puts more responsibility on the seller – who knows more about his house than an agent – to disclose information about the property, thus taking some of the burden off the Realtor or agent, he said.

If sellers are completely honest, mandatory disclosure protects them from potential lawsuits when buyers discover problems.

Prospective buyers, of course, benefit because they have a written document with all the property information to help them make their decision.

But along with mandatory disclosure comes many questions and debate about what should be disclosed and when it should be disclosed during the home-selling process.

“The devil is in the details,” Fridlington said.

Executives at Jack Conway & Co. and elsewhere are cautious about using disclosure forms.

Some companies have created forms that they give to agents to present to sellers. Sellers are asked to complete the forms voluntarily. Other companies use a standard form developed by MAR about 20 years ago.

At Jack Conway, Realtors are not required to give sellers disclosure forms. The company’s attorneys have opined that it’s a bad idea to use the MAR voluntary disclosure forms because they feel it puts “the seller at an unfair advantage.”

Thomas W. Rudolph, executive vice president of Norwell-based Jack Conway & Co., questions the validity of using seller disclosure forms and said if a law is passed requiring sellers to disclose property condition, the disclosure forms or statements must be carefully crafted.

Some of the questions featured on today’s forms are difficult for an average homeowner to answer, he said. Sellers may not be qualified to answer some questions and may take guesses.

Rudolph cites the example of a form that asks a seller how many gallons of water per minute flows out of a water source.

“How many homeowners know the answer to that?” he asked.

Another tricky question for sellers to answer is whether a basement has ever had water. Rudolph said a seller might truthfully answer no, but then a storm might come along after the buyer has moved in and the basement might get flooded.

Instead of relying on disclosure forms, homebuyers should get professional inspections, Rudolph said.

GBREB’s Shanahan agrees. Home inspectors can catch problems that sellers might not even be aware of, and relying on the seller to disclose property problems may put the buyers at a disadvantage, Shanahan said.

And mandatory disclosure also puts an extra burden on the real estate agent, Shanahan said.

If for example, a seller discloses on a form that a fire occurred at his house, how much investigative work does the agent have to do to find out how much damage was done?

“Where does the broker stop in that investigative process?” Shanahan asked. “We view the Realtor or the agent as a marketing agent not as an investigator,” he said.

Since most insurers offer discounts or require agencies to use property disclosure forms, Shanahan said the government doesn’t have to step in to force agents to use them.

“The marketplace really starts to take care of itself,” he said.

GBREB attorneys advise the board not to use seller disclosure forms. But GBREB is in the process of finalizing a seller disclosure form to be given to members if they choose to use one.

“We want members to have access to the best form if they want to use one,” Shanahan said. “We, as an organization, try and provide what we believe is the best advice and counsel for our members to minimize the liability they may be exposed to.”

Measure of Protection
Despite the opposing arguments, many in the real estate business see definite advantages of mandatory disclosure.

“The thinking is that it [disclosure statements for sellers] levels the playing field between buyers and sellers,” said Ralph Holmen, a NAR attorney.

Mandatory disclosure forces sellers to point out the negative along with the positive aspects of a property and it makes the whole process more “disciplined and rigorous,” Holmen said.

“There may be things that the buyer might not ask about but for the appearance on the seller disclosure statement,” he said.

Buyers will know the true condition of a property and can decide whether to buy or how much to offer for the property, he added.

Massachusetts real estate agents and Realtors have a duty to answer questions regarding stigmatized or psychologically impacted property – like whether a house has ever been the scene of crime – but they are not required to voluntarily disclose or investigate such information.

About 32 states have some form of mandatory property condition disclosure for sellers. In most states, a uniform statement or form has been adopted as part of a statute. In other cases, the responsibility of drawing up a form to be used by all sellers has been delegated to a real estate commission.

Debates about what questions should appear on disclosure forms don’t really go to the heart of the overall value of seller disclosure, Holmen said.

“That’s a concern that can be dealt within the details of the seller disclosure forms,” he said.

Holmen said sellers can be protected from potential lawsuits if they complete disclosure statements.

Leaders of The DeWolfe Cos., based in Lexington, agree there are benefits to having property condition disclosures signed by sellers. They would likely back mandatory disclosure if given the chance.

Richard J. Loughlin Jr., DeWolfe president, said four out of the five states his company operates in – Maine, Rhode Island, Connecticut and New Hampshire – have mandatory seller disclosure.

“We have a seller’s disclosure form [in Massachusetts] that is voluntary,” Loughlin said. “In many instances it gets signed, and in many instances it does not.”

Loughlin said the idea of having mandatory property condition disclosure for sellers has been “floated out there.” But he is not aware of any big push to have mandatory seller disclosure.

“If there is a new position, we certainly would like to review it,” Loughlin said.