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Seller Disclosure Requirements
Minnesota statute 513.52 & 513.60 cover the rules for Real Estate Disclosure Law. Seller's of a property are required to make a written disclose to prospective buyers of their home. The disclosure must include all material facts which the seller is aware that could adversely and significantly affect:
- an ordinary buyer's use and enjoyment of the property
- any intended use of the property
- the disclosure must be made in good faith and based on the best of the seller's knowledge at the time of the disclosure.
This requirement has left many wondering where is the line of what they should disclose and what should they do not need disclose. This can lead to over thinking: "what would an ordinary buyer care about that?" Some sellers may feel that a minor item did not affect their use or enjoyment of the property and feel that should they disclose the item it could affect the marketability of their property. In the end you never know what affects a buyer. Remember, we are all different people with different tastes and tolerance levels. The Golden Rule is to always Disclose no matter how major or minor the item is. For what may be minor to you may be major to another.
The Minnesota Association of Realtors along with the Minnesota State Bar Association both offer a standardized Property Disclosure Statement which you can fill out. This will help you provide a clear disclosure to the potential sellers. It is also possible to negotiate where both the buyer and the seller agree to waive the seller's requirement to disclose. However, this can be seen as a Red Flag my many. There are also Alternative Disclosure documents for owners of Real Estate who have never lived in the property and cannot account for a proper disclosure. Lastly, the seller may perform a 3rd party inspection of the property and provide the inspection report to potential buyers as a possible disclosure. It is important to note that if the inspector missed a material fact that the seller is aware they are still required to disclose that material fact.
One thing to note is that your REALTOR® must always disclose any material fact they are aware of. They cannot waive any right to disclose.
City Inspections
Knowing your local city requirements is important. Many but not all cities require some kind of city required inspection. These often known as Truth-in-Sale Housing Inspections or Time-of-Sale Inspection Reports. These inspections are conducted by a city inspector or a city approved private inspector to look for any defects in the property that do not meet current building standards and identify if there are any Hazards. It is important to note that the depth of this inspection and the inspection requirements can vary from one city to the next. It is also important to note that some cities may require repairs while others only require disclosure. Your REALTOR® will help you navigate the process and determine if your home requires a city inspection at the time you list the property.
Private Buyer's Inspection
As a home buyer it is always important to protect your interest. Buying a home can be one of the largest transactions of your life so why wouldn't you consider protecting yourself. So it is important for a home buyer to consider conducting their own Buyer's Private Inspection. It is important to note that in Minnesota, Home Inspectors are not licensed. That means that anyone can choose to start their own home inspection business regardless of their actual knowledge of home construction. Former contractors may choose to become home inspectors and may have extensive knowledge of one area of home construction. But when they may have weaker knowledge of other areas of home construction. As a result it is important to always consider working with a Home Inspector who is a member of an inspection association that requires continuing education and training to ensure your home inspector knows what he is doing.
It is also important when writing your purchase agreement offer that you consider to make the offer contingent on the results of the inspection. This will allow you to re-negotiate asking for changes in offer terms such as making repair requests. You can also void or cancel the purchase agreement as a result of the inspection contingency too. Just be sure to complete your inspection and respond to the sellers in the timeframe detailed out if the Purchase Agreement you write..
Buyer Repair Requests
When representing a buyer I often recommend they make repair requests on any major items that came to light in their private inspection. How you ask for a Repair Request is important.
Example:1
"Seller agrees to repair the leaking kitchen sink."
In this example the seller will repair the leaking sink. However, how they repair it is vague and the quality of work has not standard set.
Example 2:
"Seller agrees to hire a licensed plumber to repair the leaking kitchen sink at seller's sole expense prior to closing. Seller shall furnish to buyer in writing a copy of the BID for approved work for proper lender required TRID disclosure. Furthermore, seller shall furnish to buyer at the time of closing in writing copies of all paid receipts and/or lien waivers for all contractors or subcontractors who perform work as a result of the inspection repair request. All said work shall be completed to proper building standards and permits for work must be pulled."
In this example we were very clear as to how we want the work completed. It also will protect the buyer from mechanics liens being filed as a result of either the seller failing to pay the contractor or the contractor failing to pay their subcontractor who actually performed the work. It also forces the repair to meet city standards with permits being pulled etc.
It is important to note that the more items you negotiate for and request the weaker your offer may look in the eyes of the seller. Speak to your professional REALTOR® for guidance on making repair requests
Work Permits
Work Permits are required by many cities to perform certain repairs on your property. This allows the city aware of the improvements you make to your property so that they may monitor and inspect said work to ensure that the quality of work meets the city standards. It protects people from completing improper wiring which can lead to an electrical fire or improper plumbing repairs which may lead to water leaks and mold.
Who can pull a permit? The seller may pull a permit themselves when they are performing work on their own property. When hiring a contractor the homeowner should have the contractor perform the permit for the work.
Arbitration
In the standard purchase agreement used by the Minnesota Association of REALTORS® it is recommended to consider your options for Arbitration. Arbitration does have some limitations and it is important to note that you do have other Legal options if a situation arises. If all parties to the transaction signed the Arbitration Agreement you are agreeing to Arbitrate in the event when problems arise. Arbitration uses industry professionals to make a ruling of who is at fault.
If you ever encounter an issue it is important to not that in may cases your REALTOR® is not an attorney and you may want to consider getting legal advice. In the story written by WCCO, Liz Collins Legal Advice was a must.
