Disclose, disclose, disclose. This is an agent's mantra when advising sellers during the process of listing their home. Hiding defects is not only foolish (since the home inspector will more than likely find it anyway) but deliberately withholding information about defects in the property is also fraud.
So, what happens if you are just careless in filling out the required Louisiana property disclosure?
Let me tell you a quick story.
A young lady purchasing her first home contacted us recently. She had very specific criteria for what she was looking for, from the number of bedrooms and bathrooms to the neighborhoods she was interested in. One of her hot button issues was the flood zone. She was adamant that any home she purchased must be in flood zone B or flood zone X and did not want to see any home outside of those zones, no matter how beautiful or well priced it might be.
Since many sellers don't bother to complete that portion of the disclosure statement (I don't know why, it's not a secret!), lots of time was spent calling listing agents to have their sellers check their records for the flood zone. Flood zones on the West Bank can vary from block to block within the same community, so we cannot just assume that one house is zoned the same as another in the area.
Finally, we found several homes that met her needs AND were located in the right zones. She narrowed down her choices, picked her absolute favorite and successfully negotiated an offer with the seller. Inspections were done and repairs were negotiated as well. Everything was going along just fine.
Until she started pricing flood insurance.
It turns out that the home she had fallen in love with was not located in a B or X zone and she could not get a preferred rate on her premiums. As a matter of fact, her flood insurance would be about 3 times more expensive than she had planned for. I did mention that she's a first time home buyer, right? This turned out to be a deal breaker.
The end result was that the contract was canceled and the seller is now out of pocket several hundred dollars for the cost of inspections in addition to losing marketing time while the home was under contract. Why? Because the buyer argued (and rightfully so) that she would never have even looked at this particular home, much less made an offer on it, if she had been given accurate information from the beginning.
Don't fall into the trap of just assuming that you remember everything about your home. I can't tell you how many times I've heard sellers say "oh we just replaced that hot water heater a couple of years ago" only to find that the tag on it is 10 years old. Completing your disclosures can be a long and tedious process, but doing it correctly can save you money in the long run.
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Well said. I had a deal fall apart last week because the listing agent put the wrong propery taxes into the MLS (they were 35% less in the MLS than in reality) and my buyers fell out. She couldn't understand why they were upset because "the MLS isn't guaranteed information and it's not that much per month anyway". I couldn't believe that agent had no qualms whatsoever about spending the buyer's money...I don't blame them for falling out.
I agree with the seller discolsing information but also advise buyers to confirm any and all information that they receive through inspections, town records, title searches, etc.
You can visit the Jefferson Parish website to see the flood zone the properties are in. Being in an AE does not mean its ever flooded. It lets you know the X zone and you can get the rate for that. I really try to get the owners to fill in all and make plenty of notes.
Christianne, I don't blame the buyers either. It's up to the sellers to provide the most accurate information possible and it's our job as agents to counsel them on how to do that.
Samantha, the confirmation of information happened when pricing the insurance. The problem is that had the seller just verified it on their insurance policy, none of this would have happened. Expensive lesson for the seller.
Eric, I always just flat out ask for a copy of the seller's flood insurance policy and have them use the information from it as the source. Re the maps: sometimes it's hard to determine where the boundaries fall in some neighborhoods, especially if the house is close to the line.
A poorly filled out sellers disclosure can cost you a lot of money if not filled out properly
That's horrible that flood insurance could make or break a deal like. Can I ask why the seller was out so much money on inspections rather than the buyer, or did you just mis-type that? Is it customary for sellers to pay for the inspections?
You are soooo right many problems can arise from a incorrect disclosure. Sometimes we have found that the seller really thinks that something was done just a few years ago and then we find out it later that is was many years ago.
Very wise advise to give Lisa. It is better to take time out of a busy day to know the information you (seller) is providing is accurate, than to take your home off the market for the deal to fall apart because of information seller should have known, and disclosed.
Russ, yep, and this seller learned that the hard way.
Donna, flood insurance is a HUGE deal here. In a preferred zone, premiums run between $300-$400 per year. That amount goes way up (triple or more) in a lesser zone. The seller paid the buyer for the cost of inspections because the SELLER provided the inaccurate information. The buyer would not have even looked at this house had the seller disclosed the flood zone properly.
Patty, memories get fuzzy, people forget when things were done. It's a fact of life in real estate that is usually sorted out during inspections. Had the seller verified the information, this would not have happened.
RAY! I haven't seen you in forever, my friend!! Wise words, as usual :)
Lisa, you are right on the mark with this post!
Disclose, disclose is a motto we try and live by. I make sure my information is as accurate as possible. Mistakes happen but not much.
I agree with you completely! Disclosures are no place for "maybes" - the information must be current and accurate. This seller learned an important lesson, as did the buyer. You just can't trust the accuracy of the disclosure and must double-check the information yourself as well.
Full disclosure is always the best policy, everything comes out in the wash so it's best not to even try to hide anything.
Lisa, I know about some horror stories for buyers that didn't read, as well as sellers that didn't disclose. And saying that you don't remember doesn't always make it work...
David, thanks!
Laura, mistakes DO happen and it usually works out OK. This was a case of someone just being casual about the information they were providing instead of verifying it. I know a lot of sellers that assume they are in a particular zone, then when I have them pull their policy they are surprised to find out they were wrong.
Kelly, I like that answer - "no place for maybes"!
JL, I don't think the seller was trying to actually hide anything, they were just careless with something that had a big financial impact on the buyer and on themselves in the end.
Lane, do tell.... :)
I have some backed up blog posts... I'll get around to it. Check back with me daily... ;^ )
Lisa, I was surprised to read that zones can be different from street to street. I'm sure insurance there is a very big deal and can be very expensive. I'm sorry for your client--and for you. I hope she finds something she falls in love with--in a zone she wants.
Be truthful up front because if not you will pay for it one way or another.
Carole, it's amazing how the zones stop and start, which is why it's important for the seller to disclose properly! p.s. Nice to see you :)
John, isn't that the truth!