The purpose of the Seller’s Real Property Disclosure Statement is for Seller to disclose to Buyer, as required by law, any material fact concerning the property. Material facts are defined as “any fact, defect, or condition, past or present, that would be expected to measurably affect the value to a reasonable person of the residential real property being offered for sale.”
Seller: When in doubt, disclose! Just because your ice maker has not been working for the past 10 years that does not mean you should not disclose – a Buyer will possibly view it as a material fact!
Seller’s Real Property Disclosure Statement in Brief
On Oahu, we have a standardized 5 page document created by the Hawaii Association of Realtors called ‘Seller’s Real Property Disclosure Statement’, which includes more than 100 points, several of which are questions Seller has to check mark and answer by selecting from one of four choices: ‘Yes’, ‘No’, ‘NTMK’ (not to my knowledge) or ‘NA’ (not applicable).
There is also a section called ‘Defects, Repairs or Replacements (Past or Present)’ and it includes more than 35 items: Air Conditioning, Flooring, Plumbing, Appliances, Ceilings etc. Seller will check mark items that are applicable if any.
Any items Seller checks “Yes” or checks under the “Defects, Repairs or Replacements” section, require Seller to provide a written explanation.
This post is not a review of Seller’s Real Property Disclosure Statement item by item, which is very important to do, but rather a highlight of areas/topics a prospective Buyer should examine and scrutinize extra carefully.
Take a Closer Look at…..
Maintenance Fees (mainly for condos)
Seller is required to disclose how much they pay in maintenance fees and what is included in the maintenance fees (e.g. water, sewer, cable, Internet, etc).
Maintenance fees tend to increase over time – in any condo building – and a Seller may not always notice such increases as most owners are on auto pay for maintenance fees. As a result, Seller’s disclosure on maintenance fees may not always be accurate. It is therefore prudent to ask Seller for a copy of the most recent maintenance fee statement to verify the correct amount of current maintenance fees.
A Seller may inadvertently incorrectly disclose what is/is not included in the maintenance fees, such as noting that Internet is included, but actually – for Seller’s condo – Internet is usually not included! Make sure to review the ‘Project Information Form’ (sometimes called ‘Lender’s Disclosure’ or ‘Questionnaire’), which is a document commonly provided as part of the condominium documents that Buyer is to receive from Seller, and may outline what is included in the maintenance fees. If this is not available, consider contacting the managing agent for the condo association and ask for confirmation.
Parking Stalls (mainly for condos)
Seller has to disclose how many parking stalls the unit has a right to use and if such stalls are assigned, unassigned, covered or not covered. It is prudent to ask Seller to confirm parking stall numbers (if not already noted on Seller’s Disclosure Statement), look at online public records (oftentimes parking stalls assigned to a unit are listed), review condominium documents for parking stalls associated with the unit, or possibly ask the condo’s General Manager to confirm Seller’s parking stalls match parking stalls on record.
Permits (houses and condos)
Seller has to disclose if any improvements, additions, structural modifications or alterations were built without building permits.
Many homeowners do varying degrees of remodelling without taking out and closing appropriate building permits from Honolulu’s Department of Planning & Permitting. If major remodel work has been completed without building permits, including major plumbing or electrical work, confirm if the work was at least done by a licensed professional and, depending on the type of work, you may want to engage a subject matter expert and hear such expert’s opinion on ‘how big of a deal is this matter really?’.
Pending Developments (mainly condos)
Seller is obligated to disclose if there are any material facts regarding the neighborhood that would be expected to measurably affect the value of the property, such as pending developments.
Irrespective of what Seller may/may not disclose, as a Buyer you should consider if there are any development plans that could obstruct views and/or create excessive noise for extended periods of time. Get a really good understanding of the neighborhood and any possible development plans in the surrounding area.
Pest & Termites (houses and condos)
Seller is obligated to disclose if there has been evidence or presence of pest and/or wood destroying organisms in the property.
If the property has a history of termite infestation, it is probably a good idea to understand when the termite issue was addressed and treated, how it was treated, and who did the work. For instance, if some kitchen cabinets received so-called spot wood treatment 6 months ago, how likely is it there still are termites living in the cabinets? It might be a good idea to contact the person who did the treatment for a professional opinion.
Defects, Repairs or Replacements (houses and condos)
Seller is obligated to disclose all items that fall under this category on Seller’s Real Property Disclosure Statement. If something feels important, but Seller’s explanation is either missing, vague or not clear, ask for clarification. Maybe Seller has done some plumbing upgrades but didn’t disclose when it was done, why it was done and who did the work? What if major plumbing work was done by a handyman (as opposed to a licensed plumber) – are you comfortable purchasing such property?
Litigation Affecting Complex (mainly for condos)
Seller is obligated to disclose if there is any litigation affecting the complex. Even if Seller does not disclose ongoing litigation, possibly unknowingly, make sure to take a close look at the Project Information Form (or comparable form). This is typically received as part of the condo document package completed by the managing agent for the condo and is likely to reveal if there is ongoing litigation.
Litigation sounds scary because of the uncertainty associated with it. Many condo associations have been through litigation of various sorts: A disgruntled employee sues the association for being laid off; the association sues the developer for construction defects; a visitor slips in the lobby, sustains an injury, and sues the association, etc.
What should you do as the Buyer? It probably comes down to evaluation on a case by case basis, but litigation associated with major construction defects sounds on the surface scarier than an employee suing for being laid off on lack of grounds.
Special Assessments (mainly for condos)
Seller is obligated to disclose if there is any special assessment in place. Even if Seller does not disclose a special assessment, possibly unknowingly, make sure to take a close look at the Project Information Form (or comparable form) – typically received as part of the condo document package completed by the managing agent for the condo.
Sometimes condos, especially older ones, run into a need for major repairs/upgrades that can be rather costly – concrete spalling repairs, upgrading drain pipes, replacement of windows, new roof, etc. The condo association may not have the financial reserves to cover such costs or may simply prefer not to use their reserves. Instead, the association may take out a loan and levy each owner an assessment, either added as a monthly installment on top of maintenance fees or sometimes allowed to be paid off in a lump sum.
Comments & Attachments (houses and condos)
Section Q on the Seller’s Real Property Disclosure Statement is where Seller can provide written explanations as needed and also directs Buyer to possible attachments to the disclosure statement. Therefore, make sure to review Section Q and attachments.
This sums up some major sections from Seller’s Real Property Disclosure Statement which hopefully better prepares you, the Buyer, for your next real estate purchase on Oahu!
Feel free to leave thoughts or questions in the Comments Section below.