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House-buyers beware is Alabama's rule for disclosure

If you are house-hunting in Alabama, one of the most important things to know is that the state is hands-off when it comes to disclosure requirements on the part of the homeowner. Alabama uses the rule of caveat emptor, or “let the buyer beware.” That means there are very few circumstances in which the seller must disclose problems with the home.

The National Association of Realtors recounts a situation involving a Canadian couple seeking to purchase a second home in Washington, another state that employs caveat emptor. The couple hired an engineer to inspect a house they were considering. A small portion of rot was noted in the inspection report. However, the engineer indicated that it did not present a structural problem. So they purchased the home, and soon after noticed dampness, as well as potato bugs and that the ceiling tiles were beginning to separate. Another inspection turned up a case of severe rot, mold and pest damage; this damage was not found during the initial examination because it had been covered by new siding and trim, as well as insulation, to hide the problem.

The couple sued and won, but an appeals court overturned the ruling. The court denied the claim, noting that the buyers were made aware of a rot problem in the first inspection report, and it was up to them to follow up on it and discover the extent of the problem. The court also called the sellers’ action to hide the problem “egregious nondisclosure and concealment,” but found the law was on their side.

Because of the state’s “buyer beware” rule, some of the responsibility for disclosure falls on the shoulders of the buyer’s real estate agent. The Alabama Association of Realtors explains that state licensing laws make it clear that a realtor is liable to the client for disclosing any defects, including hidden ones if they know of them. That includes latent defects, or those not found during a thorough inspection, as well as anything the realtor may spot as he or she takes you through the house. It must be emphasized that the requirement to disclose applies only if the agent knows or sees the defect, however.

House hunters are best served by ensuring a thorough home inspection is made and also a careful follow-up, with specific questions of the sellers. Another suggestion is to negotiate any “as-is” clause in the contract to exclude any questionable areas found in the inspection.

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