One of the most important documents you as a buyer or seller of real estate can have is the property disclosure form. 

This is a document that discloses specific issues about a property for sale. Typically, the sellers fill out this form when they put their property on the market. If you’re a buyer and working with a Realtor this is one of the first forms you’ll receive after your offer is accepted. If you’re not working with a Realtor, instead selling your home by owner or buying from an owner without the guidance of a Realtor then this document could be missed, which could cause issues down the road when you discover defects with the property.

This form goes hand-in-hand with another document, the Due Diligence form, which tells you as the buyer what your responsibilities are in evaluating a property before consummating a sale. Realtors insist on this document because it encompasses issues that are not covered by the agent’s license.

Property condition disclosure is one of the most common areas of real estate law that crosses the desk of the Utah Association of Realtors’ associate legal counsel, Kreg E. Wagner. An interesting wrinkle in this facet of real estate law is that no Utah statute addresses it. Rather, it’s case law, all the way to the Utah Supreme Court, that has resulted in this five-page disclosure.

The High Court has ruled that it’s up to the seller to tell a buyer “material” defects about a property that a “reasonable prudent buyer” wouldn’t be able to discover on his own. A material fact is defined as something of importance to a buyer that would help determine whether to buy a property or not. If that’s not vague enough, then the safest course of action is to disclose everything. The form will help you do that.

Sellers may not know about some defects hiding behind walls or elsewhere in the house and sellers aren’t required to search out those problems, writes Wagner in his article on the subject in the current Utah Realtor magazine, the official organ of the UAR.

On the other hand, since the buyer, too, has an obligation to evaluate the property he should get an inspection. I always give my buyers at least a couple of inspectors’ contact information with instruction to pick one and then tell me when the inspection is scheduled so I can show up and participate in the walk-through with my clients.

Sometimes after a purchase is complete a buyer may complain that something in the house is broken or doesn’t function. Can he go back to the seller and make the seller fix it? Wagner’s response is, “that depends.”

A buyer must prove that a defect wasn’t disclosed, that it is a material defect, that the seller knew about it and that the seller had a legal duty to tell the buyer about it. With a property disclosure form in place, along with an inspection, that’s pretty tough for a buyer to do. And with the Due Diligence form in place it’s difficult for the buyer to go back and find fault with his agent. Buying a house in Utah is an exercise in personal responsibility. However a good Realtor will guide you through the process.

However, Realtors must disclose known material facts about property defects to potential buyers, but are not required to discover those defects. They may not disclose material facts about the client, just the property, lest the agent breach the fiduciary duty of confidentiality. So if the seller tells his Realtor about a property defect, but doesn’t tell the buyer, then the Realtor has an obligation to let the buyer know about the issue.

Occasionally buyers want to skip the inspection and save the $200 to $300 inspection fee. They are reasonably prudent and can see no problems with the home. In that situation Realtors usually have them sign an inspection waiver. This past year I’ve had a couple of buyers sign the waiver. The first time the buyer signed it because he wanted to do his own inspection. The second time the buyer was an investor and was going to refurbish the house anyway. Both relied heavily on the sellers’ property disclosure in making their decision.

In the end, the purchase contract gives the opportunity for the buyer to act on any defects discovered or disclosed and pull out of the sale by the due diligence deadline.

Rodger L. Hardy is a Realtor affiliated with Prudential Utah Real Estate and a former real estate editor. For answers to your real estate questions please email him at rhardy@utahresidentialEteam.com.