|
If the calls to the Legal Hotline and questions we get at
seminars are any indication, this issue is one of the most
widely misunderstood and widely miscommunicated issues
REALTORS® currently face in their ordinary course
of representing buyers and sellers in residential transactions.
Part of the confusion comes from banks, particularly national
banks, unfamiliar with state law and disclosure requirements in
Minnesota. Minnesota sellers are required to disclose (to the
best of their knowledge) material facts which could
significantly and adversely affect the ordinary buyer's use or
enjoyment of the property. This is required by Minnesota
Statutes, and can be found in MN Stat. 513.82 et seq.
Banks sometimes claim that they are exempt from this
disclosure, based on language in MN Stat. 513.54, that states
the material fact disclosure requirements do not apply when the
transaction is a transfer by foreclosure or deed in lieu of
foreclosure. In simple terms, this means that a person who loses
their home to the bank does not have to make disclosure to the
bank. When the bank subsequently sells the property, that bank
is a seller like anyone else, and is not exempt from disclosure.
With that said, banks can opt for one of the disclosure
alternatives, which include providing a qualified third-party
inspection or entering a written agreement whereby the buyer
waives the disclosure requirements.
Keep in mind, just because the bank demands that the buyer
waive the disclosure doesn't mean the buyer has to agree to the
waiver. Banks want to sell just like anyone else, and
contractual terms are negotiable. It is reasonable and
appropriate for a buyer to condition the purchase on the bank
providing a third-party inspection of the property, at the
bank's cost, or that the bank simply disclose what they know.
Sometimes it is in the buyer's interest to have the bank
disclose material facts, because on occasion the previous owner
or a previous prospective buyer told the bank issues that have
now become material facts, which the new buyer may want to
know.
The related issue to the material fact disclosure requirement
is whether banks are exempt from other disclosure obligations,
either because they are selling a foreclosed property, or
because they have persuaded a buyer to waive the material fact
disclosure. The simple answer to both those questions is "no".
Banks, like all sellers, have an obligation under Federal law to
disclose lead-based paint hazards, for properties built prior to
1978. This cannot be waived, and banks must complete this
disclosure just like anyone else. State law requiring disclosure
of wells, septic systems, airport zoning issues, methamphetamine
production, valuation exclusions and other applicable laws are
also disclosures that are separate and distinct from the
material fact disclosure waiver, and cannot be ignored by
banks.
When working as a listing agent on behalf of a bank, be sure
to inform them of these issues, and advise them to discuss these
issues with their attorney. You as a listing agent are
responsible for disclosure as well, so don't be lured into doing
everything the bank says just because they say it's so, if you
believe it is contrary to law. As a buyer's agent, be sure the
buyer is aware that some of these disclosures are mandatory, and
they should be comfortable asking the bank to provide what is
required.
Stay tuned for Par II in the "Bank as a Seller - What Now"
series.
Questions? Contact Brad Boyd bboyd@tn-law.com. |
