There are 5 key points that a home seller in Wisconsin needs to understand about real estate disclosure:
#1 - The law, the industry and the marketplace all assume that most home sellers will complete a real estate condition report. According to Wisconsin statutes, the seller of a property shall furnish a RECR (or may substitute a professional written report). See sec. 709.02, Stats, reads:
#2 - The buyer can waive receipt of a real estate condition report.
#1 - The law, the industry and the marketplace all assume that most home sellers will complete a real estate condition report. According to Wisconsin statutes, the seller of a property shall furnish a RECR (or may substitute a professional written report). See sec. 709.02, Stats, reads:
709.02 Disclosure.
(1) In regard to transfers described in s. 709.01, the owner of the property shall furnish, not later than 10 days after acceptance of a contract of sale or option contract, to the prospective buyer of the property a completed copy of the report under s. 709.03 or 709.033, whichever is applicable, subject to s. 709.035, except that the owner may substitute for any entry information supplied by a licensed engineer, professional land surveyor, as defined in s. 443.01 (7m), or structural pest control operator, by an individual who is a qualified 3rd party, or by a contractor about matters within the scope of the contractor's occupation, if the information is in writing and is furnished on time and if the entry to which it relates is identified, and except that the owner may substitute for any entry information supplied by a public agency. Information that substitutes for an entry on the report under s. 709.03 or 709.033 and that is supplied by a person specified in this section may be submitted and certified on a supplemental report prepared by the person, as long as the information otherwise satisfies the requirements under this section. A prospective buyer who does not receive a report within the 10 days may, within 2 business days after the end of that 10-day period, rescind the contract of sale or option contract by delivering a written notice of recision to the owner or to the owner's agent.
Per 709.05, the buyer may rescind in writing a contract of sale or option contract if a defect is disclosed in a RECR received after the contract. Note, "The right to rescind under this section is the only remedy under this chapter."
709.08 Waiver. A buyer may waive in writing the right to rescind under s. 709.05. If a buyer proceeds to closing, the buyer's right to rescind under s. 709.05 is terminated. A buyer may waive in writing the right to receive the report required under s. 709.02.#3 - The two key sources of liability for home sellers after closing are claims of title defects and claims alleging misrepresentation/failure to disclose adverse conditions. There is no way to absolutely limit a seller's liability after closing. However, wise sellers try to reduce the likelihood of getting sued after closing. Title searching and title insurance are used to reduce the likelihood of title defect claims.
This leaves the type of claim brought against the vast majority of sellers who get sued after closing - misrepresentation. Misrepresentation claims against sellers often arise from the real estate condition report (which typically is incorporated by reference into the contract). Remember that misrepresentations can occur through what is stated affirmatively as well as through what is not stated (misrepresentation by omission).
To make matters worse for Sellers, Wisconsin has a false advertising statute which may apply to someone who makes a false or misleading statement to induce a buyer to purchase a home. Under § 100.18(11)(a), a successful buyer may be awarded their monetary loss (potentially doubled) plus costs and attorney fees. The longer the seller defends against the claim, the greater the seller's exposure in the event of losing the case.
#4 - While an "as-is" provision may provide some protection and certainly would be better than the standard form in terms of defending against alleged seller misrepresentation, an "as-is" provision may not entirely remove the risk of a suit arising from an undisclosed condition. For example, in Green Spring Farms v. Spring Green Farms, 172 Wis. 2d 28 (Wis. App. 1992), some calves on the property had been killed by salmonella bacteria. The seller apparently believed that the problem had been alleviated and did not disclose the condition. The seller sold the property "as-is," the buyer later experienced problems with the salmonella contamination, and the buyer sued the seller. The Court held that the seller had a duty to fully disclose material adverse conditions even though the transaction was "as-is." The rationale is that the seller has this material information and the buyer is not able to discover the information.
#5 - The standard form real estate condition report asks the seller to disclose defects which are "known" as well as defects about which the seller has "notice." What does "notice" of a defect mean? The simple answer is we don't know. We know it means something different than actual knowledge. But we don't know whether the seller had "notice" of a later-discovered defect until the jury answers that question after a long and expensive legal battle.
Consider a buyer who learns after closing of damaged shingles on the roof. The buyer sues the seller seeking the cost of the new roof and claiming that the seller misrepresented the condition of the roof by checking "No" to the question "I am aware of a defect in the roof." The seller checked "no" because the seller did not know about any defect. But, again, the form actually is asking whether the person has "notice or knowledge." Under deposition, the seller will be asked, "Were you not aware that there was a hail storm in 20__?" "Did you not know that several of your neighbors suffered hail damage such that their roofs were replaced?" "Did that not provide you with notice of the fact that your roof may have been damaged?"
One might respond that the seller should have told the buyer about the hail storm in 20__. But consider all of the myriad of facts that could provide some notice of a problem with any of the various components of a home.
If a seller is going to disclose ANYTHING, the seller should disclose EVERYTHING. If a seller is going to make any disclosure whatsoever, the seller should discuss any known or suspected property conditions which might arguably provide notice of a potential defect.
Because of the risks relating to allegations of purported misrepresentation, it may be advisable for a seller to refuse to disclose anything and to refuse to permit buyers to rely upon the seller for information about the condition of the property. "What are you trying to hide?" and "Why not just be honest?" are two typical responses. However, note that there are many people who have been sued for alleged misrepresentations who thought were were completely honest and forthright. If the buyer feels as though information was withheld, they may allege that the disclosure was misleading.
Because of the risks relating to allegations of purported misrepresentation, it may be advisable for a seller to refuse to disclose anything and to refuse to permit buyers to rely upon the seller for information about the condition of the property. "What are you trying to hide?" and "Why not just be honest?" are two typical responses. However, note that there are many people who have been sued for alleged misrepresentations who thought were were completely honest and forthright. If the buyer feels as though information was withheld, they may allege that the disclosure was misleading.
It is possible, though not common, for a seller to indicate that the seller will not complete a RECR, the buyer must waive receipt, and the buyer is not entitled to and must not rely upon any seller representations relating to the condition of the property. The reason this is rarely done is that it makes marketing/selling more difficult. The trade-off in giving a sales pitch is that one might later be said to have misrepresented something. But a seller should be aware of the risks associated with making less than a complete disclosure.
If you are going to say anything, say everything.
RESOURCES:
Garvey v Krueger, 2018 WI App 39 - Wis: Court of Appeals, 2nd Dist. 2018
Lawyer, vol. 66, no. 5, May 1993, pp. 18-56. HeinOnline.
https://heinonline.org/HOL/P?h=hein.barjournals/wilaw0066&i=824 (Note: references prior stats.)
Attorney James N. Graham of Accession Law LLC is
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