Let the Buyer Beware

"Caveat Emptor" or "let the buyer beware" used to be the watchword for buyers of real estate.  Over the years a number of inroads have been made to protect the buyers of real estate, but a Illinois law may make the "as is" sale of homes a thing of the past.  The Residential Real Property Disclosure Act requires the seller of residential property in Illinois to deliver a written disclosure document regarding the physical conditions of the property to prospective buyers before a sale contract is signed. 

This Act is specifically designed to benefit all the parties in a real estate transaction.  A standardized form for the required disclosures has been adopted by the Illinois legislature.  The Act is designed to reduce the number of oral representations which are made concerning property during the negotiation process, and it is hoped that it will promote the faster settlement of disputes between buyers and sellers.

Included under the Act are transfers by sale, installment contract, assignment of beneficial interest, or a lease with an option to purchase.  The Act does not apply to transfers of newly constructed residential real property that has not previously been occupied. In addition, the Act does not apply to a variety of other types of real estate transactions including Deeds in lieu of foreclosure, transfers by inheritance, transfers pursuant to certain court orders, and transfers between spouses, descendants, and co-owners.

 Under the Act a seller is required to disclose material defects of which the seller has actual knowledge.  A "material defect" is one which has a substantial adverse effect on the value of the property or which significantly impairs the health and safety of the occupants.  A seller does not have the affirmative duty to investigate the status of the property to uncover defects.  The seller is also not required to amend the disclosure document once it has been delivered to the prospective buyer unless the disclosure document is inaccurate or contains omissions that the seller knew about at the time the disclosure document was signed.

Further, a seller is not liable for failing to disclose a defect that the seller had knowledge of but reasonably believed was corrected. Also, a seller is not liable for errors or omissions in information provided by a contractor about matters which are within the scope of the contractor's expertise.

Under the Act the seller has the responsibility to complete and deliver the disclosure document to the buyer.  It is likely that real estate brokers will take an active role in making sure that the disclosure document is delivered to a prospective buyer.  In fact, some real estate brokerage companies already require their sellers to complete such a disclosure document even though the law has not yet taken effect.  The required disclosure is not a warranty by the seller of the condition of the property.  Therefore, a buyer of real estate should insist on all warranties that they otherwise would have as if the law did not exist.  The seller's disclosure should also not be used by the buyer to take the place of the buyer's own inspection of the property or the buyer's employment of a professional inspection service to inspect the property.

Finally, the statute is not intended to limit or modify any other duties and responsibilities of a seller to disclose information about the property to avoid fraud or misrepresentation. A seller who violates the Act is liable for actual damages incurred by the buyer as well as for court costs.  The court can also award reasonable attorney's fees to the successful litigant.  If a buyer wishes to bring an action against a seller for violation of the Act, such a complaint must be brought within one year from the earlier of the date of possession, the date of occupancy, or the date on which the Deed to the property is recorded.

Be sure to contact our office if you are buying or selling a home and have any questions about this Act, particularly if a real estate broker is not involved in the negotiations.

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