As Buyers What Are Your Duties Regarding The Iowa Residential Real Estate Disclosure Form

As a potential buyer of someone else’s home you have an obligation to protect yourself by doing certain things before making an offer to purchase. Iowa law goes only so far in protecting you as the buyer. The law cannot protect you from yourself. If you are lazy, don’t want to think or don’t care to investigate the real estate you buy then blame no one except yourself if you buy a lemon. As a buyer you do have certain duties that laziness will not excuse. 

Get used to the idea it may cost a little money now to protect you from having to spend a great deal more following the closing. It is better to spend a few hundred to investigate before closing, than to have to spend several thousand after the closing because the furnace didn’t work as you had anticipated. A leaky roof, a bad AC unit, clogged sinks or a poorly insulated attic can cost a new buyer considerably.

As the buyer what are your initial duties?

Buyers’ Duty

1. Get a copy of the disclosure.
2. Read the disclosure.
3. Ask questions of your agent.
4. If the agent won’t provide answers speak directly to the sellers.
5. If neither answers your questions, walk away from the deal.
6. Ask in writing for clarification.
7. If the disclosures are anything other than a “yes” or a “no”, then ask for a new disclosure form properly filled out.
8. If that is not provided, walk from the deal.
9. If you don’t like the answers you are getting or the answers are so vague they provide no useful information ask more questions.
10. If the answers still don’t answer your questions, walk from the deal.

HOW TO CONTACT US

The Lombardi Law Firm

5000 Westown Parkway, Suite 440

West Des Moines, Iowa 50266

Telephone: 515-222-1110

Fax: 515-222-0718

Write to Steve or Katrina

Email: sdlombardi@aol.com or katrina.schaefer8@gmail.com

Iowa Residential Real Estate: What is due diligence?

Due diligence is work and requires planning, thinking and execution, which is why it hardly ever gets done right. If you are lazy and ignore the due diligence inspections you can make a very expensive mistake.

Most calls I receive from disgruntled buyers can be explained by their lack of performing due diligence. During the home buying process they notice defects, but then quickly try to explain it away to avoid additional work. This is buying on a whim and with your home costing you thirty years of mortgage payments I’d think it deserves more attention to detail.

So what is due diligence? Formally it is a set period of time with a start and end date during which you duty as the potential buyer is to investigate by examining the physical aspects of the property you are attempting to buy.

Due diligence can last several weeks and how long it lasts is never set in stone. As the buyer you can set a long or a short due diligence period; the longer the better from the buyer’s standpoint. If the seller wants a real short due diligence period it usually means there is a hidden defect or defects the seller does not want you to discover.

As the buyers, you should set the due diligence for at least two weeks and no less. Then during those two weeks you need to spend some money on experts, although there are ways around having to pay for the serviceman to examine the systems.

During the due diligence period consider all the systems of the house and have one or more serviceman who are qualified, ready, willing and able to evaluate the quality of the systems in place. As an example the furnace and air conditioning system needs to be evaluated. You will need a heating and air conditioning company to enter the home (make arrangements) for the purpose of opening up the furnace door and examining the internal parts to make sure you don’t have broken pieces (heat exchanger is one example).

Who pays when the due diligence inspections were done or weren’t done right?

Normally the buyer does unless they can show the sellers hid a known defect. That is an expensive venture and normally the costs of litigation exceed the cost of repairs. When the cost of litigation exceeds the repair costs, litigation is not an option for the buyers. Litigation is not always the best course. There are many situations where getting out your checkbook is the best course of action.

Diligence Means To Act With Diligence

So act purposefully and meaningful during the due diligence period and make a list of all the systems within the house. Identify vendors who can evaluate the systems in the home and then schedule the appointments. Here is a list of what in my opinion you need to do.

DUE DILIGENCE ACTION LIST

1. Take the due diligence period seriously.
2. Stay organized about how to conduct the due diligence.
3. Spend money to get the right service experts in to evaluate the home’s systems.
4. Attend all inspections with your experts.
5. Ask the experts questions.
6. Actively participate in the inspections.
7. Read their reports several times and make sure you understand.
8. Know the limitations of those reports.
9. Buy the home warranty covering all systems.
10. Make the sellers pay for the home warranty if the disclosure form isn’t clear in any way.

This is Steve Lombardi, attorney and real estate broker coming to you from Iowa.

HOW TO CONTACT US

The Lombardi Law Firm

5000 Westown Parkway, Suite 440

West Des Moines, Iowa 50266

Telephone: 515-222-1110

Fax: 515-222-0718

Write to Steve or Katrina

Email: sdlombardi@aol.com or katrina.schaefer8@gmail.com

Can I get sued if my agent says to simply mark ‘unknown” on the disclosure form?

Yes you can get sued for failing to make a disclosure if a defect in the property relates to that category. Here is a reason why this is likely. Let's say you bought the house and the furnace proved to be defective. The owners, not being HVAC professions thought they could get away with checking off "unknown" on the disclosure statement. After all they aren't qualified to know if the heat exchanger is cracked. So far sounds good doesn't it. 

But let's dig deeper. The owners knew the furnace was acting funny, it wasn't producing the right amount of heat and their heating bills were increasing. There were other signs but we don't need to go into all of them. 

What the owners did need to disclose was their knowledge about the furnace not working right. And their knowledge is not unknown, in fact they know enough that any reasonable buyer would suspect more investigation was necessary. An HVAC inspection for less than $100 would have discovered the cracked heat exchanger and the owners would have been required to spend the $1,000 to repair it. 

So what we have is a seller failing to disclose their knowledge about the furnace and that is a violation of Iowa law. 

As a lawyer, my advice to the buyers would be so to sue the sellers for failing to make any disclosure as to their knowledge of the defective furnace, water heater, water softener, roof leaking, windows leaking or any other defect in the home’s systems. 

I know what the sellers will say when the letter arrives from the buyers' lawyer asking for reimbursement of the HVAC repair bill. "But my real estate agent said I can mark ‘unknown’ on the disclosure form."

Whose advice should you follow? It doesn't matter what the real estate agent told you to do when filling out the disclosure form. That is legal advice and to my knowledge there are very few real estate agents and brokers in Iowa who are also licensed attorneys. Real estate agents are not permitted to give you legal advice. This is legal advice. That and they will probably deny ever telling you how to mark the disclosure form.

Make sense? If not call us for a consultation.

Is checking ‘unknown’ a legitimate disclosure answer for Iowa’s residential disclosure form?

No it is not a legitimate descriptive category of the owners' knowledge. After all, if the owners don't know what they know then who would? The who fills out the form is an owner with knowledge of the home. If they've never lived there then and have absolutely no knowledge of defects or repairs then the appropriate answer would appear to be "no". You are the owner and as an owner you are responsible to know the condition of your property. "I don't know" is not a legitimate answer because what you are disclosing is your knowledge of defects and repair. 

How can an owner not know what knowledge they have? It's absurd for an owner to say they have no knowledge of their knowledge.

Under Iowa law you have a duty to disclose what knowledge you have about defects. You either have knowledge of defects of you don’t. If you mark “unknown” you are failing to say if you do or do not have knowledge of a defect. So marking ‘unknown’ is a huge red flag to a lawyer and it is a failure to disclose your knowledge and that is a violation of the law. If the buyers came to me as a lawyer I would most likely advise them to sue the sellers for failing to disclose. And that is how I see "unknown" as an option - it's simply a failure to disclose.

Make sense? If not call us for a consultation.

You can buy, but not sell a house “As-Is”.

Buyers have a duty to disclose known defects. Sellers have no duty to read or to pay attention to what is being disclosed. So, you can buy a home on an ‘as-is’ basis, but as a seller you have to fill out a written disclosure form and deliver it to any buyer making an offer. If you don't then you're in violation of the law.

Make sense? If not call us for a consultation.

Buying A Home: Hey save all those purchase documents!

If you are going to buy residential real estate then you need to become as familiar with the process as you can. You also need to get organized and that means learning how to create a paper file that will support your side of the deal if after the deal is done it becomes undone. Paper is what will help protect you in the event you bought a house of cards or the proverbial money pit. So let’s discuss how to get organized.

Whenever you purchase a home you should start off organized and even after the sale is indeed done, stay organized by saving all the sale-purchase documents in a file folder.

Figure out which of you is better at organization and make it their job to keep the documents complete and available. That way there is no discussion later on about thinking the other was saving "those documents". Here are the tools you need.

1. Create a file folder with the address or name of your neighborhood.
2. The file folder should have multiple sections so you can divide the contents.
3. One section should be for what your agent gave you and another for what the sellers handed out.
4. Using a 3-ring binder, save all the owner manuals for the appliances and systems in the house.
5. In the home owner’s folder save all those purchase documents you were given, and especially the Iowa Residential Real Estate Disclosure Form.
6. Save the home inspection.
7. Save the real estate agent's business cards.
8. Pick up any business cards left on the counter, because they could later on become witnesses in your case.
9. Before closing make sure all the documents were signed and dated. Don't leave the closing without signed documents.
10. Keep a copy of the offer and acceptance forms that are exchanged.
11. Keep a copy of the sale’s brochure and materials.
12. At the closing require not just keys but owner manuals and if available copies of the purchase invoices for the various appliances.
13. At the closing require a list of vendors who have regularly serviced the real estate. (The plumber, pool company, heating & cooling company, roofer, siding, gutters, lawn irrigation company, electrician, etc.) You want to know who knows your home’s systems and how they work.

So get organized and stay organized. 

HOW TO CONTACT US

The Lombardi Law Firm

5000 Westown Parkway, Suite 440

West Des Moines, Iowa 50266

Telephone: 515-222-1110

Fax: 515-222-0718

Write to Steve or Katrina

Email: sdlombardi@aol.com  or katrina.schaefer8@gmail.com

How do I sell my house “as-is”?

Well first you read my blog post titled, As a seller is it legal to sell your house ‘As-is’?

Do you want to know what my answer is to that question? My answer is yes and no. You can sell your house ‘as-is’ so long as you make all the proper disclosures. In other words you can sell as is but you just have to tell the buyers what’s wrong with your house. They can assume all those nasty defect costs but you can’t sell without first letting them know via the disclosure statement what is wrong with it.

The problem is with how people think about their duties when they try to sell a house ‘as-is’. As-is doesn’t mean that as the seller you have absolutely no duties. It simply means the buyers buy without regard to defects. But that doesn’t change the sellers’ duty under the Iowa law. Seller still must fill out the disclosure form in an honest manner.

Make sense? It should. If it doesn’t call Katrina or I. We are both lawyers and I’m also a licensed real estate broker.

See Seller Disclosure Statements, Steve Lombardi

I’ll carry this on our two blogs, the Iowa Real Estate Lawyer on Blogspot and the Lombardi Law Firm blog titled The Verdict.