Tuesday, July 1, 2008

Spuds and SPDS

Stock exchange Image ID 627651 by user awottawa photo credit to StockExchange user awottawa

Sellers who use a Realtor to sell their metro Phoenix area home quickly become familiar with enough acronyms to make the Federal government proud (and confused). ER, SPDS, BINSR, CLUE. In this example, the acronyms are enough to make any sane person wonder if their slightly daffy relative ran over a potato farm with the car and needs a ride to the hospital.

(That sentence is mildly smile-inducing inside my head; let me know if it tempts a grin in your neck of the woods.)

So, what’s a SPDS? And is it anything like the edible tuber that’s yummy when served with butter, sour cream and chives next to a big juicy Porterhouse? Read on, intrepid blog browser.

What Are SPDS?
Arizona law requires sellers disclose to buyers all known, material problems about properties they sell. The Seller’s Property Disclosure Statement (SPDS) document created by the Arizona Association of Realtors is a convenient form for doing this. Not working with a Realtor? You’re not exempt from disclosing what you know about the property. You’re just unlikely to have ready access to the nifty form.

Why Do I Need to Do This?
If you sell a property that has a material defect of which you were aware but didn’t tell the future Buyer, you could be liable to a lawsuit. Disclosing everything you know about the property you’re selling can protect you in the future.

What Should I Disclose?
The short answer is everything. The longer answer is that you should disclose everything that could influence a buyer’s decision to buy (or not buy) your property. This includes improvements you’ve made and problems you’ve had, as well as what you did to solve those problems. It also includes anything prior owners did to the property of which you are aware, or even things prior owners did that you suspect or only partially remember.

The bulk of the SPDS questions are phrased, “Are you aware of ….?”  If you aren’t aware, or don’t know the answer, you should answer “no”. Your Realtor is not allowed to fill out the SPDS for you, and is generally not supposed to tell you what to put on the SPDS. Realtors: offering guidance is OK; dictating answers is not.

On the last page of the SPDS form, you can add explanations. It’s OK to say things like -

  • I think the prior owner replaced some of the PVC plumbing with copper but I only got verbal info on that.

  • We had a tub leak in 2003. We repaired the leak and our insurance company replaced the drywall and carpeting.

  • We converted the garage into a living room in 1999. We didn’t get permits or HOA permission but we had licensed contractors do the work.

Can I Disclose Too Much?
Don’t worry about ‘killing a deal’ by disclosing what you know about the property. If there’s something that’s so wrong with the property that it’s bad enough to be a potential deal-killer, you should be more worried about getting sued later for not disclosing it now. It’s better to be honest on the SPDS and discuss the property’s condition upfront with your Realtor. Then let your agent make recommendations about properly pricing & marketing your home so that it sells to a buyer who knows all about it and buys it anyway.

How Long Do I Have to do This?
By contract, Sellers (through their Realtor if they have one) must provide the future Buyer with a written Disclosure Statement within 5 days of contract acceptance. Buyers, ask questions if you don’t understand the answers! Sellers, remember that honestly and completing filling out the SPDS form will take a little bit of time and some record pulling. So, the sooner you complete the document after listing the home for sale, the better. The last thing you want is to be scrambling to fill out a SPDS form at the 11th hour. It’s kind of like waiting to start your 1040 tax form until April 14.

You Can’t Eat It, But It Can Help You Sell
A complete and honest SPDS will help your property sell. Even if the property has problems, it can be sold . . . if it’s priced right, marketed correctly and properly disclosed.

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