Avoiding a Money Pit: Buyer Beware vs. Full Disclosure States

A new home can easily become a money pit, just like the movie of the same moniker released in 1986.  Have you seen it?  It's worth a watch, it's a family favorite. 

Homeownership is a big step to take, and it is important to know all of the risks associated with a newly built or old home. Most states belong to one of two distinctions, those being ‘caveat emptor’ (buyer beware) states or full disclosure states. The difference between the two lies in how thorough defects and issues with the home have to be disclosed.

For the majority of the time, one would assume that a seller would be truthful in all regards pertaining to a home. However, depending on the state you live in and its individual laws and regulations, you may fall right into the hole, literally. Some states make you disclose a major death in the home while others don’t, some make you disclose visible, major defects, while others are more thorough. In all 50 states, however, disclosure of lead paint in homes has to be provided for structures built before 1978.

In Virginia, the disclosures are more relaxed than D.C., so in this way it is a caveat emptor state. The only items that would have to be disclosed include those that are ‘known material defects’. This needs to be given to the buyer in the form of a written disclosure. Other issues with the home can easily fly under the radar when it comes to appliances and those that may have become troublesome but aren’t noticeable. In addition, a disclaimer has to be made regarding what sellers aren’t responsible for when it comes to defects that could be pinned on them, as they aren’t required to disclose.

On the other hand, in D.C. a full workup, including a property disclosure document needs to be completed in regards to the property. This form includes the distinctions of both material and latent defects on the property, including major flaws and those which might otherwise be hidden. In addition, all appliances and systems such as HVAC, plumbing, etc., have to be reported so that buyers are well informed of their conditions. D.C. is more thorough in its disclosures and therefore buyers don’t have to do the legwork of making sure everything is up to the standards it needs to be.

These disclosure differences don’t have to mean that you end up trapped in a house which costs you more money than it’s worth. They simply mean that if you are buying in Virginia rather than, let’s say, D.C., you as a buyer have to beware. As a buyer, make sure you work with an agent with experience who can help you determine what needs to be inspected, clarified, or further investigated. Instead of just taking what you get at face value, explore a useful resource such as a home inspector who can report back to you any latent defects.

In addition, your agent can assist with tough discussions with the seller and their agent and ask targeted, specific questions regarding any issues in the house. This leads into the property insurance you may end up purchasing, with specific plans and warranties that can protect you against those things that may slip through the cracks… literally.

Money Pit is a classic yet dramatic take on everything that can go wrong along the way to get to your end goal of your dream home. However, it's a good example of what not to do and is a cautionary tale to all buyers out there. Make sure you work with a broker who knows and understands your state's disclosure laws before you buy, and realize that if something looks too good to be true, it usually is. And if you are selling a property, make sure you work with an experienced agency that understands your state’s disclosure requirements so you list the home properly and avoid potential legal issues later, even in caveat emptor states where rules may appear relaxed.

Urban District Realty can make sure you achieve a seamless and disclosure-filled home buying experience. With our levels of experience and excellent expertise, we can help guide you through murky waters to your end goal.