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Afraid of Water In the Basement? A Solution May Be Near

June 27, 1991

NEW YORK (AP) _ The three-bedroom ″dream″ colonial bought with your life savings has a leaky roof and basement you only discover on the first big downpour after moving in.

The furnace conks out three months later. Then you learn the septic system eventually will need replacing.

What kind of recourse does a homebuyer have? Thousands have gone to court over the years, sometimes blaming real estate brokers for their home nightmares.

The National Association of Realtors maintains the seller should bear the responsibility, and this week kicked off a major campaign that would require homeowners to list known property defects in writing when selling a home. The trade group and its state associations are lobbying legislatures around the country to establish these seller disclosure laws.

Realtors President Harley E. Rouda says the laws would benefit both buyer and seller by giving each peace of mind. But at least one homeowner group contends real estate brokers clearly have the most to gain, since the law would effectively place most potential liabilities on the seller’s back while Realtors could still collect lofty sales commissions.

Right now, California and Maine are the only states with some type of disclosure law. About 30 others have proposed legislation in one form or another, Rouda said.

″It’s probably going to be a several-year proposition ... by the time all the legislation gets passed,″ he said. ″This is an important consumer issue.″

It also would be one of the biggest and most important changes in broker- client relationships in recent years.

The Realtors group is proposing the use of standardized disclosure forms in which sellers would list conditions of their property and known defects for which they later could be held liable - be it a leaky roof and basement or a faulty furnace and septic system. After all, says Rouda, who knows better about one’s property than the owner?

″Even the best (home) inspector may not be able to know that a basement had settling problems ...,″ he said.

The form also would serve as a checklist for buyers, addressing their concerns about the property on the spot.

Jordan Clark, president of the United Homeowners Association in Washington, D.C., says that while he believes buyers should be made aware of all property conditions, ″the buyer has a responsiblity of knowing what he’s getting into.″

″Most homeowners don’t know much about air-conditioning systems or dry walls or plumbing,″ he said. ″So, what if they say, ‘I don’t know of any defects in my house,’ and there turns out to be?

″You’re getting into a whole new legal aspect of selling a house.″

Clark said brokers would have the most to gain under the Realtors proposal because the burden of liability would fall on the seller, even though the broker is hired by the seller to market a property and shares the profits from a sale. ″What will (brokers) give up as a result of these changes? Charge less fees?″

Rouda said that while it is a broker’s obligation to advise buyers of known defects in a property, some could be held liable if a property is discovered to have defects the broker unintentionally failed to describe correctly. Although no statistics on lawsuits are kept, an estimated two-thirds of all suits against real estate agents allege misrepresentation or failure to disclose defects.

Rouda, who runs the Columbus, Ohio, real estate firm H.E.R. Realtors Inc., recalled a situation in one of his own offices in which a broker was sued for a termite problem and her case languished in the courts for two years.

″She was a basket case″ as a result of the stress, he said, adding that his office since has instituted its own seller disclosure program.

The laws in Maine and California mandate that both broker and seller take responsibility by disclosing known property defects.

Carol Leighton, director of the Maine Real Estate Commission, said the state’s 3-year-old laws have reduced significantly the number of buyer complaints, particularly those over septic systems.

″Since the seller has to sign this document, that means most people will honestly answer it,″ said Steven Sokol, an attorney for the California Association of Realtors.

In California, sellers not only must tell buyers about any problems with the structure and systems of a house, but also must disclose such hazards as radon, asbestos or lead-based paint and any zoning violations.

The laws reportedly have meant a windfall of business for home warranty policies and home inspectors.

″In California ... they’re quite thrilled with the law because it has given them a lot of business,″ said Vera Hollander, a spokesperson for the American Society of Home Inspectors, based in Washington. ″Some of the people trying to sell can’t fill (disclosure forms) out.″

End Adv PMs Thursday, June 27

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