Disclosure by an Estate
So everyone is familiar with the Real Estate Seller’s Disclosure Law (“RESDL”), right? I’d agree that most are, except when it comes to exceptions! And the exception that seems to cause most confusion is that applies to decedent’s estates.
The law makes clear that a transfer by a fiduciary in the course of the administration of the decedent’s estate need not provide a real estate seller disclosure form. So why is it that executors frequently provide completed forms?
Regardless of what you may know of RESDL, it does not represent the totality of Pennsylvania’s real estate disclosure requirements. Common law (case law), years before the passage of RESDL, abrogated the doctrine of caveat emptor (buyer beware). On a decision by decision basis, Pennsylvania courts have found duties to disclose adverse conditions that a reasonably prudent buyer would or could not learn of by way of a casual examination of a structure and its surrounding property. Contaminated wells, radon, are good examples but just about any major problem known to a seller and undetectable by a buyer require disclosure regardless of the applicability of RESDL and its requirement to furnish a disclosure form.
Thus, while RESDL may not require an executor to provide a form, common law requires that he disclosure a material defect not readily apparent. Many listing agents will ask an executor, especially with one familiar with the property, to complete a disclosure form as it alerts the executor to all of the systems and components that should be considered when trying to recall the problems. That can work but unless the executor lived in or cared for the property there will be many ‘unknowns’ on the form. That can lull a buyer into believing there are no problems and perhaps is a good reason why the executor might forget the form and merely indicate, in writing, what he knows to be a problem.
To repeat, while an estate may forgo the disclosure form requirement, material defects must be disclosed. And should the estate agent have knowledge of material defects not disclosed by the executor, the agent will be liable for non-disclosure. This is so even when the sale is “as is.”
It gets more complicated if the agent suspects a defect that the executor thinks need not be disclosed. This happens in traditional sales when a seller wants to seek disclosure of a questionable problem. I don’t think this is all that difficult to resolve: If you are not permitted to disclose a condition you consider to be, or likely to be, a material defect, terminate the listing. You are justified and besides, how hard is it for the selling estate to find another listing agent?
An alternative is to have the estate engage an expert to evaluate the problem. Even if that eliminates the question (no problem found), I’d still disclose any prior reports citing the problem together with the more recent evaluation. A good practice is to always assume that a buyer will eventually learn of a prior adverse report, and when not shared, will assume fraud.
Happy Summer to all!!
