What is the seller liable for after selling a house?
This answer is not entirely straightforward because liability depends upon the terms of the sales contract. In this part of Maryland, most realtors use what’s called the Maryland Association of Realtors Residential Contract of Sale. This is a valuable contract for many reasons, one of the most notable being that it allows for addendums or provisions.
For example, if the seller decides to leave an appliance they originally wanted to take with them, they would make an addendum to the contract of sale so that both parties are aware of and anticipate the change. Although these provisions can be helpful, details can be convoluted and may create problems between the buyer and seller.
Maryland’s Real Property (real estate) law imposes certain obligations on sellers to disclose latent conditions in the house or property. Section 10-702 defines a “latent condition” as a material defect or improvement made to the property that:
- A buyer would not notice even after careful visual inspection.
- May pose a direct threat to the health or safety of the buyer or an occupant of the property, including a tenant or guest.
For example, a serious latent condition would be the presence of asbestos in a ceiling. You may not see the asbestos, but its presence can have dangerous health effects on the person or people who live on the property.
If the seller does not reveal a latent condition on their property, they will be liable for the reasonable cost incurred by the buyers to correct that condition. Depending on the situation, this may cost tens of thousands of dollars. That’s why I always advise clients to be upfront and honest with the buyer. The client may have avoided or delayed fixing a problem on their property, but not disclosing it is a bad idea that will most likely cost them heavily.
Another reason for the seller to be upfront with the buyer is to avoid worrying that the buyer will find out something was hidden from them and take legal action. The temporary “fix” of hiding an issue is not worth being sued over later. The simplest way to avoid this is to tell the truth. As the seller, you may have to spend money to fix the problem. You may not make as much money, but that’s a much better option than being sued.
If you’re sued, you’ll have to pay for both the cost incurred by the buyer to fix the problem and the buyer’s attorney’s fees. The buyer may choose a more expensive contractor than the seller would have done to fix the problem. Because the seller does not have control over the cost to fix an issue but may be responsible for those expenses, it’s much better to fix the problem before selling.
Imagine that you have inherited or been gifted a dilapidated or vacant home. You want to sell, but you may not know the building’s history; you may not know whether it flooded, has mold, asbestos, or any other issues. A reasonable seller would expect to receive much less for that property. Certainly, the price would be reflective of the expense that any buyer is going to incur to bring it up to market.
There is such a thing as an “as is” contract. The seller would need to include a proper addendum to the standard MAR Residential Contract of Sale or whatever contract is used. The person who sells the house “as is” needs to make sure the contract documents the condition of the home and the fact that there is uncertainty in its condition. In that situation, you should disclose this uncertainty and ensure that the buyer is aware.