All REALTORS have “war” stories about undisclosed items. I have one myself. In this case, I was representing a Minneapolis home seller who provided written disclosure about a small crack in a block concrete wall. It was not a huge crack. The property sold and closed. A few days later, the buyer decided that he was not very happy about that crack, and acted like he was surprised to see it. He called me up and threatened litigation against the seller. I pulled the disclosure out of the file, and read to him the very paper that he had signed. We never heard from him again. This was a “war” story that had a happy ending for my client.

The vast majority of real estate transactions have happy endings. The home sellers have dutifully described defects or other issues that might affect the buyers’ ability to enjoy their new home. If there was a city-mandated pre-sale inspection, the report was prominently displayed at the property. The buyers hired private inspectors. There were no surprises.

The following is a list of common real estate disclosures, along with a few notes on each. Please note that this post is for information purposes only. If you are uncertain about the legal sufficiency of disclosures for any property, please consult a real estate attorney.

Seller’s Property Disclosure Statement

This is a disclosure that satisfies the requirements MN Statutes 513.92 through 513.60. The seller has a duty to disclose any adverse conditions in the property. All sellers are subject to this disclosure requirement, but there are a few exceptions. Not all sellers are required to fill out this form. To determine if you qualify for an exception, examine the list exceptions on page nine of the Sellers Property Disclosure Statement. If you are unsure, consult your real estate attorney. Please note that this document is not a warranty or a guarantee of any kind. Sellers and agents make no such representations. A private inspection is a good idea.

Here are just a few items that this disclosure addresses:

• Encroachments, easements, restrictive covenants
• Location on 100 year flood plain
• Structural changes to home
• Water problems in basement, crawl space, or slab, mold
• Roof leakage and water damage
• Presence of human remains
• Property tax status or preferential property tax treatment
• Environmental concerns
• Defective appliances, mechanical systems, electrical systems, plumbing

Not all items need to be disclosed. Here are a few examples:

• The owner or previous owner has been diagnosed with HIV or AIDS
• Suicide, accidental, or natural death
• Paranormal activity
• Proximity to any adult family home, community based residential facility

Compensation Disclosure

The buyer’s broker uses this form to disclose the amount of compensation he will receive from the seller or seller’s broker, or the buyer.

Well Disclosure Statement

Sellers must disclose the presence of any wells on the property. The seller also provides a map to depict the location of each well. Also, the seller discloses if the well is in use, not in use, or sealed.

Private Sewer System Disclosure Statement

The seller must disclose the location and status of all known sewage treatment systems. I would still recommend having a private septic inspection. Septic system requirements vary from location to location. You may want to contact the County Sanitarian/Environmental Dept to find out more. You want to ensure that the septic system is in compliance.

Arbitration Disclosure

See Arbitration.

Common Interest Community Re-sale Disclosure Certificate

See Townhome and Condo HOA

Disclosure of Information on Lead-based Paint and Lead-based Hazards

Every buyer showing an interest in a home built prior to 1978 must be notified that the property may contain lead-based paint. This disclosure also gives the opportunity for the seller to share any inspection reports he may have that indicate the presence of lead-based paint. The form is also used to document the fact that the potential buyer has received a pamphlet which explains lead-based paint hazards in detail.

Related posts:

1. What is “Arbitration?”
2. Minneapolis Truth-of-Sale-in-Housing Requirements

Frequently, sellers hope that they can “start out high, and people can just make an offer.” This sounds like a good strategy. It would be a good plan if the Minneapolis real estate market were not competitive. The low offers will go to similar competing homes with lower asking prices. Also, an overpriced home will probably rack-up a long market time, and you may find yourself in the position of “chasing the market down.” The competing homes drop their prices, and you follow suit later. You are racing the competition to the first and best offer, but you are always a couple of laps behind. A correct list price at the outset means that you have a better chance for a good sale price. Most of the showing activity occurs when the home is first listed, and tends to drop off over time. The listing becomes “shopworn,” and cooperating agents are less and less likely to show it.

Market Analysis

A REALTOR does not need a special license to provide a market analysis of your home. In a nutshell, a market analysis is a combination of statistics and judgment. Here are three common approaches that are used to help establish price:

1. Comparable sales data. The REALTOR provides information about comparable homes that have sold in your area within the last six to twelve months. The most similar homes closest to the subject property that sold most recently are examined. Differences in size, features, and conditions are factored in to the calculation. This method is important, because it looks only at homes that have actually sold and closed. Keep in mind that your buyer’s mortgage company will be ordering their own appraisal. This appraisal will be looking at past sales to establish value. If there are no comps to support your price, the appraisal will come in low, and the lender will reject the property.
2. Comparable active listings. These are the comparable homes on the market that your buyers will also be considering. The buyers may want past sales data, but will base their choice on what they perceive to be the best value in homes currently for sale. It is important to keep in mind that these homes have not sold, so some of them might be overpriced.
3. Subjective approach. Your REALTOR has seen hundreds if not thousands of listings. The REALTOR may have a good “feel” for how buyers might respond to your property. Of course, this intuitive method should get a good reality-check with available data. Home valuation is not an exact science; there are just too many variables and too many differences in buyers. Every home is unique.

Appraisals

Only a licensed Minnesota appraiser can perform an appraisal. After inspection of the subject property, the appraiser may commonly use the three following methods to determine value.

1. Cost Approach. The appraiser uses information on the costs of materials and labor to determine the cost of constructing a similar home. This method is typically used to determine the upper limit of value. The cost approach method has some limitations; location and amenities are not reflected in the cost approach.
2. Sales Comparison. The appraiser researches recent sales of comparable homes in the area and makes adjustment according to features such as amenities and size. The appraiser will add or deduct specific dollar amounts for these differences.

3. Income value. If the property is used as rental property, the appraiser may use a third approach. The amount of income the property generates is used to determine value.

The appraiser will then reconcile information gathered from all methods before an estimated market analysis is determined.

Related posts:

1. Minneapolis Real Estate Market Report 2009

Types of Minneapolis homes subject to evaluation:

• Single-family houses
• Duplexes
• Townhouses
• First-time condo conversions

Tpes of sales subject to evaluation:

• Sale by owner
• Sale by real estate agent
• Real estate agent-assisted sale
• Contract-for-deed
• Other title transfer

Ordinance Requirements

• An interior and exterior inspection of the condition of the property is required. A written evaluation must be prepared and submitted to the City of Minneapolis by a licensed evaluator. The City of Minneapolis does not contract with these evaluatiors. Evaluators can set their own fees, but must be licensed. The report will contain a list of required repairs.
• The property must be re-inspected after required repairs have been competed. Typically, these are completed prior to closing, However, a buyer may have up to 90 days after day of closing to make required repairs and have a re-inspection performed. The evaluator will always charge a re-inspection fee. A total of two trips by the evaluator are usually needed. If repairs require permits, a city inspector will be required to inspect the work.

Avoid an Unnecessary Return Trip and Charge by Evaluator

• Make sure that the entire building is accessible, including all rooms, attic, basement, and garage. The evaluator must also be able to access the water heater, floor drains, furnace, and water meter.
• Gas, water, and electricity must be turned on.
  The evaluator must see that the furnace, water heater, and garage door opener are in working condition.
• All smoke detectors must be working.

Most Commonly Required Repairs

• Install, repair or replace battery or battery-backup smoke alarms on all floors (one per floor, ncluding attic and basement
• Install backflow valves on laundry tub and outside faucet.

These repairs are minor, but they are extremely common. Other requirements could encompass electrical, heating and plumbing systems repairs, or inadequate structural support systems. The actual list of possible required repairs is quite lengthy. As a courtesy, some evaluators will supply you with a list of possible repairs, if you request it prior to the first evaluator visit.

Who is Responsible for Repairs

In most cases, the buyer will expect to have the repair work completed and approved prior to closing. However, if the buyer is willing to assume the repairs, they must be completed and approved within 90 days of closing. If the home needs major work, the buyer can request an extension.

Back to Minneapolis real estate page.

Related posts:

1. Disclose! Disclose! Disclose!
2. What is “Arbitration?”