What If The Seller is Hiding Something

--- by Osman Parvez

True story: The seller bought the house only a few years ago, but they didn't have an old inspection, service records, invoices, or receipts. Not from the previous owner and no documents from their ownership period. Not only that, but the seller would only accept the offer if the buyer waived due diligence doc requirements. 

What does that make you think….that the seller is hiding something? DING DING DING! The price is right, Bob.  

Distrust and suspicion are the likely result of a failure to disclose. 

The right way to handle disclosures is to provide everything. When sellers are transparent, it creates a higher level of trust - the most critical ingredient for a smooth deal. Buyers will often increase their offer price or remove contingencies for a home when the buyers feel confident in the old inspection, seller disclosures, and seller honesty. In some cases, they will even waive their inspection (against our recommendation). That’s why it’s important to provide these documents for buyers to review prior to submitting their offer. 

But what if the buyer’s inspector misses a major inspection issue? Sorry, hope is not a strategy. More likely than not, the buyer's inspection will find the obvious problems. 

This is why we recommend pre-listing inspections. The benefits of scheduling a pre-listing inspection include providing the seller with a checklist of areas to repair (or disclose and credit), allows the seller the ability to choose the contractor and control costs. When the buyer is presented with the pre-sale inspection and a stack of receipts for repairs, not only is the seller regarded as honest and trustworthy, the house is perceived as better maintained. 

For the seller, this represents upfront cost and more work prior to listing. However, the trade-off is a higher sale price, shorter time on market, and far lower risk of exposure to buyer extortion when inspection issues are discovered. 

By the way, agents in Colorado have a legal duty to disclose material defects. The law is clear. This is why a seller cannot simply terminate a deal when presented with an inspection objection backed by an inspection report. What the seller and listing agent may have suspected about the house’s condition, is now clearly a known material defect. The seller also can’t fire their agent and move on to another one because they have a binding listing agreement. They're stuck dealing with the buyer in hand or pulling the listing from the market to make the repairs, potentially pushing their listing into the slower off-season. 

Some agents clearly do not understand the law around disclosure of material defects. When buyers see that a house has been on/off the market they should always request a copy of the past buyer’s termination notice and inspection report. 

Finally, there are some legitimate reasons that a seller may not have any disclosures to provide the buyer. Just because disclosures are absent doesn’t mean the seller is hiding anything. Estate sales and income properties often come with limited disclosures, for example. Buyers should at least consider the reasons why a seller doesn’t have documents to provide.  

Remember: even if buyers are given a recent inspection by a reputable inspector, they should still do their own inspection. And sellers who can’t provide disclosures are doubly advised to get a pre-sale inspection. 

TLDR; Shady behavior by the seller creates distrust and suspicion, lowering the eventual sale price and increasing time on market.   

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.  We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

image: Javardh

Please Note

This document contains forward-looking statements. You are strongly cautioned that investment results are subject to business, economic and other uncertainties. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time. Always consult your financial advisor before making an investment decision.