The Washington Seller Disclosure Statement has been a huge failure since its passage on January 1, 1996. Why is this important? If you are a buyer, you might expect that you are protected by the Washington Seller Disclosure Statement, which requires the seller to disclose all defects of the property.
Having practiced as a real estate lawyer for 20 years, I can tell you that the Washington Seller Disclosure Law and the Form 17 Seller Disclosure Statement does not protect you from seller misrepresentation, whether it is intentional or unintentional. But you ought to know how you are effected as a buyer or as a seller.
Washington Seller Disclosure Statement Law
When the wise politicians of the state of Washington passed the Washington Seller Disclosure Statement law in 1996, I remember saying, “This law will have no beneficial effect for buyers at all.” The reason I said that was because you cannot legislate honesty. Our courts are just as full of seller misrepresentation lawsuits today as they were before this law. If a seller is going to lie about a defect in the house that is not clearly visible to a buyer, that same seller will simply mark “Do not know” on the disclosure statement on that question. By answering “Do not know” the seller eliminates the buyer’s ability to prove they did know. The rules of evidence do not help. You can’t prove what someone knew or did not know in their head. This is a no brainer. Unfortunately, the politicians who passed the seller disclosure law and the lawyers around the state of Washington who continue to support new laws and subtle nuances to contract language addressing seller disclosure are . . . “smart by half” as the saying goes. As I have said in other articles, one should be cautious about people who claim they are going to protect us, especially when those people are politicians and lawyers.
Washington Seller Disclosure Statement Issues in the P&S
In an earlier post I wrote extensively about the requirement that Washington real estate forms (the NWMLS forms) include a line 9 in the Purchase and Sale Agreement with an option for a buyer to sue or not sue a seller for the tort of misrepresentation. Lawyers around the state decided that the NWMLS needed to include a line 9 in the Purchase and Sale Agreement in which the seller agreed or disagreed to be sued by the buyer for what could be unknowing or unintentional negligence about some aspect of the property. Leave it up to the lawyers to come up with a check box in which a seller can agree or disagree to be sued! This was a huge legal boondoggle that confused real estate agents (not to mention buyers and sellers) around the state and generated more lawsuits for lawyers. Read my full analysis of line 9 and seller misrepresentation at Washington Seller Disclosure Statement.
Now we have a new case, which is forcing the NWMLS (Northwest Multiple Listing Service) to delete line 9 in the Purchase and Sale Agreement. Two recent cases decided by the Washington State Supreme Court have given the NWMLS the opportunity (or obligation) to delete line 9. Line 9 required that the parties negotiate whether or not the buyer could sue the seller for negligence in completing Form 17. The new Court decisions now require courts to analyze the facts of each case and decide whether or not the buyer has a claim for negligent misrepresentation against the seller, rather than barring such a claim automatically under the “economic loss rule.” This whole issue of seller misrepresentation and disclosure is a pot of gold for lawyers and legislators. It’s a gift that keeps on giving, but not to consumers, not to buyers. Buyers don’t benefit at all. Amazing. And the whole justification of the law is to protect buyers.
For buyers there is a way to avoid this whole nightmare of whether or not a seller is misrepresenting the property. It is not to rely on a form with simple questions and check marks that can be evasive. It is not to assume anything or to be forced to rely upon the word of a seller you don’t know. The key is to hire a good real estate buyers agent and to hire a good home inspector. It is critically important that your buyers agent has the experience to recognize potential red flags so they can be examined in more detail by a professional. Experience and wisdom will guide you and your professionals and reveal any red flags or potential issues of concern. In other words, if there is a problem with the property, you need to find it yourself with professionals to assist you. That is truly the best and most effective way to buy a home and be protected.
Are Real Estate Agents Liable for Seller Misrepresentations?
In Washington State real estate agents are specifically protected from any buyer claims of seller misrepresentation. The state law is RCW 64.06.020, and states, “THE FOLLOWING ARE DISCLOSURES MADE BY SELLER AND ARE NOT THE REPRESENTATIONS OF ANY REAL ESTATE LICENSEE OR OTHER PARTY. THIS INFORMATION IS FOR DISCLOSURE ONLY AND IS NOT INTENDED TO BE A PART OF ANY WRITTEN AGREEMENT BETWEEN BUYER AND SELLER.”
Real estate agents are told not to complete the Form 17 Seller’s Disclosure Statement for the seller, and they should not even help them complete the answers. Otherwise, they could open themselves to liability to a buyer for any intentional misrepresentations.
Is It Hard For a Buyer To Win a Lawsuit for Misrepresentation Against a Home Seller?
It is extremely difficult for a buyer to win a misrepresentation lawsuit against a home seller. The burden of proof, the rules of evidence, and trying to prove what the seller knew and didn’t know, is nearly impossible. As an attorney I represented buyer’s in such lawsuits, and I will tell you judges are extremely reticent to rule against a home seller unless the trail of proof is so blatant and the damages so egregious, that they feel they have no other choice.
One of the reasons Sellers will check the “Don’t Know” box on so many of the questions on the Form 17 is because it avoids liability in most cases. If they check “Yes” or “No” to any question, they are making a representation that could come back to haunt them, but if they check “Don’t Know”, how could a buyer ever prove they knew in their heads but made misrepresentations anyway?
Can a Buyer’s Agent Help Avoid Seller Misrepresentation?
A good buyer’s agent cannot prevent a seller, who he does not represent, from misrepresenting a property, but a stellar buyer’s agent can help make sure his buyer does not step into a trap for the unwary. This is where knowledge, experience, and discernment come into play, and a buyer will be well advised to hire a great home inspector who can help him recognize potential problem areas. In addition, a professional buyer’s agent can recommend due diligence the buyer should do to discover problems not explicitly revealed in the Seller’s Disclosure Statement.
The Washington Seller Disclosure Statement does not protect buyers as intended but buyers can still protect themselves with honest, experienced, and professional advice. This article was first published in December of 2010, and here we are almost 10 years later and everything here still applies, although I have added a couple of small updates. Now you know about Seller Disclosure Statement, aka Form 17 in the State of Washington.
Last Updated on September 10, 2020 by Chuck Marunde