By James L. Goldsmith, Esq.
By now you’ve hopefully read yesterday’s PARJustListed article discussing the Pennsylvania Supreme Court’s decision that a murder-suicide (and other stigmatizing events) do not have to be disclosed to a potential buyer as a material defect. If not, take a moment and come back when you’re done.
This article addresses a few of the practical implications of the Court’s decision.
- What do you do when asked to list a property with a history of murder, suicide, rape, assault, home invasion or similar horrid event?
When listing a property, do you even ask if a stigmatizing event has occurred? In light of the Supreme Court’s decision, it is not essential that you inquire. Should the seller mention it, or if you know of the event on your own, however, you should discuss it with the seller and agree upon whether it will be disclosed.
In the absence of a question asking whether such an event occurred, sellers and real estate licensees are not required to disclose stigmatizing events. Though the events may have an impact on the property’s value, it is not the type of condition that constitutes a “material defect.”
The decision whether to affirmatively reveal a stigmatizing event belongs to the seller. If a seller chooses a course that is inconsistent with your comfort level, you are free to not take the listing.
Undoubtedly, the buyer will learn of the events though this information many come after the proceeds and commission checks have been banked. This does not mean that the buyer will not make waves and some fallout should be expected. Can you imagine a buyer making disparaging comments about you and your business to anyone and everyone?
- What if a buyer or his agent asks if a stigmatizing event occurred in the property?
If you’re asked the question, the Court’s decision certainly does not allow you to lie and answer “no” if such an event did occur in the property! If the truth is “yes” you have two options: to answer in the affirmative (with your seller’s consent) or to indicate that you are not at liberty to answer the question - in which the case the buyer will certainly think the answer is yes! Falsely answering the question, however, is not an option.
- What if you’re a buyer’s agent and your client remarks that she would never want to live in a home where a suicide occurred?
This type of information should alert the buyer agent that he needs to inform the buyer that sellers and licensees in Pennsylvania are not required to come forward with this type of information. If the buyer does not want to buy a home where such an event occurred, then the buyer has to make an inquiry. If the seller answers “no” that he is not aware of an event having occurred in the property, confirm it in writing, and consider recommending that the buyer conduct additional due diligence. In Milliken v. Jacono, the Court noted that the murder-suicide was well publicized with coverage appearing in print and on the Internet. In this age it is hard to imagine that a stigmatizing event would fly under the radar (if so, it wouldn’t be a stigma).
The recent opinion also sheds light on the Supreme Court’s view of the Real Estate Seller Disclosure form (Form SPD) published by the Pennsylvania Association of Realtors®. One of the arguments that the homebuyer asserted in the case was that because the seller chose a disclosure form that went beyond the requirements of the law (PAR’s form), the seller’s non-disclosure of the murder/suicide was improper. The Court dispatched this argument rather summarily: “Voluntarily revealing more than is required does not create additional involuntary requirements.” The Court also noted that PAR’s form closely tracks what is required by the seller disclosure law “except that on each required disclosure, the statement goes into more detail.” And, in a very complimentary fashion, the Court quoted from PAR’s disclosure: “This disclosure statement covers common topics beyond the basic requirements of the Law in an effort to assist sellers in complying with disclosure requirements and to assist buyers in evaluating the property being considered.” Right on, PAR!
Is Milliken v. Jacono the word on whether stigmatizing events must be disclosed? Absent action by the legislature, it would seem so. PAR will, of course, continue to keep you up-to-date on other ongoing legal and regulatory issues, but for now this issue is settled with the Supreme Court’s decision.