Thursday, September 10, 2009

What Should You Disclose if Someone Dies in a Home?

What should You Disclose if Someone Dies in a Home? I just listed a home for sale in Cupertino that fell into this category which causes me to think about sharing it with you. This can be a touchy, little understood subject. Generally, I don’t like to give disclaimers because it sounds like I don’t know what I’m talking about, but my legal team says I must, so here goes. If in doubt about what you should disclose when selling a home or how to handle the estate of a deceased, please consult your attorney. OK, that’s out of the way, I hope they’re happy. Now let’s go on to the discussion at hand. If you are selling a home, you must disclose if a person has passed away inside of the home if it occurred within the past 3 years. If someone passed away and it’s been longer than 3 years, you don’t have to disclose it, but you can’t lie about it either. Here’s what I mean. You don’t have to tell a potential buyer in writing or verbally that someone passed away in the home if it’s been longer than 3 years, but if a buyer or a buyer’s representative asks you the question directly if a death has ever occurred in the home, you must tell the truth. Why is 3 years the magic threshold? Maybe the congressman who wrote the bill was spooked by ghost for 3 years before she went away (I really have no idea). There are plenty of other types of disclosures that may change depending upon if a seller inherited the property and if she/he lived in the home.
Here’s one scenario that I run into fairly often. Someone passes away inside of a home. That person had the foresight to create a trust and identify another person as a trustee. A trustee is someone who is given the responsibility to carry out the wishes of the deceased. Typically, the deceased will choose someone they trust a great deal to disposition their assets upon death. Using a trust and identifying a trustee typically avoids fighting amongst the heirs (often children) as to who should do what. When the dollars are large, the emotions and temptation are great. Regrettably, I’ve seen arguments occur amongst family members of my clients in this situation. So let’s say that someone passes away and asks her best friend to be a trustee. Let’s assume that’s you. You, the trustee, must sell the home per your friend’s wishes. As your Realtor, I would first need a copy of the trust. I would run it by my title company’s legal department to ensure that everything is legal and that you have legal authority to sell the home. I have had occurrences where additional documents needed to be prepared and notarized before the trustee could legally sell a home even when a trust was in place. Could you imagine buying a home only to learn later that the seller didn’t have legal authority to sell? Most of the time the deal wouldn’t close escrow because the title company would catch the problem during the closing process. But it would still create a lot of frustration, to say the least. Moving on, let’s further assume that you did not live in the home with the deceased. Because you have no firsthand knowledge about the home, you have limited disclosure requirements. Typically a seller must disclose everything they know about the home’s condition that would have a material impact on the buyer’s decision to buy. But since you haven’t lived in the home, these are things you might not know. Such as how old the roof is, if the plumbing has ever had a problem, etc. What you do have to disclose in writing is a form called “Supplemental Statutory and Contractual Disclosures”. In this document is where you are asked if someone had died in the home within the past three years. You’re also asked if you have knowledge about a few other items. One of these items you must respond to is regarding major defects in the property. Here’s where you need to be very careful. Even though you may not have lived in the home, if you have knowledge of a defect in the home, you must disclose it to a potential buyer! Just because you didn’t live in the home does not let you off the hook from disclosure if you know about the issue. When in doubt, disclose, disclose, disclose. What we are really talking about here is legally protecting yourself. So many people are concerned about getting a tad less money for the home if they mention everything they know that is wrong with the property. One lawsuit can wipe out those few extra dollars and a lot more. Another disclosure you will need to make is called “Hazards Disclosure Acknowledgment and Addendum”. This is where you will disclose if you have knowledge that the home has lead based paint. Most people don’t know and it’s OK to say you don’t know. You will also need to disclose “Water Heater Compliance”. This tells a potential buyer whether or not the water heater has been strapped to the wall to prevent tipping over during an earthquake. As the seller, you (the trustee) must ensure that the water heater is strapped before you close escrow and transfer title to the new buyer. In California, it’s the law. It’s cheap so don’t worry too much about it if your water heater isn’t strapped on the home you’re selling. My clients often ask me if they have to bring the water heater installation up to the current code which can into several hundred dollars depending upon how it was originally installed. That’s not required, only that it is strapped to the wall. A buyer may request that you bring it up to code, but that’s a negotiable item and you are not required to do so. You will also need to provide to the potential buyer an Environmental and Geological Report. As your agent, I would order these for you. As your agent I am also required to prepare another set of disclosures to present to a potential buyer that is more involved than a traditional sale, but that’s not something you’ll need to worry about. One more disclosure I’d encourage you to provide, though it’s not required, is a disclosure saying that it’s the buyer’s responsibility to verify any building permits. Sometimes people add on to their home. Sometimes they get permits, sometimes they don’t. Sometimes a great looking addition was not constructed with permits. By completing a disclosure like this, it puts the liability on the buyer to search for permits. This provides you, the trustee seller, with a layer of insulation above and beyond what you may not know. Being a trustee and selling the home of a friend is one of those things you hope you really never have to do. But if you do, please know that the deceased has put a great deal of trust in you. Congratulations. That person thought very highly of you and can pay you no higher a compliment. For specific questions, please contact me. -Gary Nobile, Realtor (408) 247-4029


  1. I bought a 1 million dollar home in Palm springs ca ibe year ago.
    from a tusttee for the family trust. the family and trust spent years in that home. They signed a disclosure with limited problems. After we bought the home we found several big ticket items that the trustees were aware of but did not disclose. The trustee visited us and discussed these problems. He then wrote a letter explaining when they tried to repair these itmes. He also listed a number of other problems to look for. Now the trusttees are claiming expemption from disclosure. Can they do this with so many kown preexisting facts that they knew about.
    We purchased the home based on their disclosure and the fact that they lived in the home for 55 years and were well known builders and developers and supplied original plans and thier story of life in that home. We never dreamed that they knew about these defects. We have local repairmen who can also suuport our cliam that they knew of these problems.
    What shoud I do?
    Philip in PS

  2. Dear Philip,
    First of all, I'm sorry to hear about your experience. Here's my disclaimer: I cannot give legal advice and you should contact an attorney for legal mmatters. Having said that, if I were you, I would call my attorney. If you like, you can go to my website and look up Steve Pogue's contact info under my "Business Directory", he's probably the right guy for this situation. Any seller that has knowledge of material facts that have an impact on the value of the property must disclose them to the buyer. Period. Failure to do so is grounds for legal action. I have heard of specific situations, just as you have described here, where a buyer has sued and collected for damages because of a seller's failure to disclose something they knew (before the home sale closed escrow) that had an impact on the value of the property. As a practical matter, you should evaluate the cost of repairs vs. the cost of attorneys fees and the headaches that go along with legal action. If the dollars are big, then go after them. If they are small, well, it might not be worth the headache. No lawsuits are guaranteed to win and you might wnat to find out if the other party has the money to pay if you do win. Best of luck to you Philip!