The Granger Firm - Frequently Asked Questions
Q. Does someone selling a house "AS-IS” still have to fill out a seller's disclosure form in Pennsylvania?A. In general, despite the fact that parties might agree to an AS-IS deal, the Pennsylvania Seller Disclosure Law still requires disclosure of certain matters, unless an exemption is applicable. Pennsylvania's Seller Disclosure Act requires an owner to disclose all known material defects to a buyer when a property is sold. A "material defect” is a problem with a residential real property that would have a significant adverse impact on the value of the property or that involves an unreasonable risk to people on the property. The law also requires (in order to assist in the disclosure of material defects), that the seller fill out and sign a disclosure form when a residential real estate transfer takes place of a building containing 1-4 units. Sales of single family homes, duplexes, triplexes and quads are within the scope of the law. The Act requires that the buyer be provided a disclosure form prior to signing the agreement of sale unless one of the exemptions is applicable.
There are numerous exemptions (1), including transfers by an executor while administering an estate or sales of new construction when a warranty is being provided along with a certificate of occupancy.
Importantly, the Seller Disclosure law also states that a seller is not liable for an inaccuracy in filling out the form if the seller did not know of the error or reasonably believed that the material defect had been corrected. The reasonable belief could be based on what a professional had told the seller about the issue. The Seller Disclosure Act is generally geared towards a buyer being told what a seller knows about the condition of the property.
Note that in agreements of sale for commercial properties, the Seller Disclosure Law is not applicable, although parties often make such disclosure as part of their agreement.
Q. If a buyer changes his or her mind about purchasing a house just prior to settlement, can a seller force the buyer to complete settlement when the seller has no other buyers and needs the funds to complete its own purchase of a new home?A. Pennsylvania recognizes what is called a suit for specific performance against a seller (when a seller defaults) or a buyer (when a buyer defaults). However, suits involving specific performance claims must always be reviewed individually to see if the suit is appropriate for the situation. Suits against buyers are limited to very specific situations under current Pennsylvania case law. More common when buyers default are suits for the purchase price, suits for damages arising out of the default (such as a lower price on resale) or suits to retain the deposit paid by the buyer. As with any lawsuit, factors such as the time required to successfully litigate the case, the cost of bringing and litigating the case and the ability of the buyer to pay any judgment that might be obtained must all be analyzed. Moreover, often times the buyer will allege another reason why the house is not being purchased and will not agree that he/she simply changed its mind. Where a seller needs funds to settle on another house, professional guidance by experienced counsel is essential to deciding what, if any, litigation is appropriate.
Q. If a buyer failed to obtain a mortgage for the purchase of a house because the buyer was unable to sell its current house, does the buyer get a refund of its deposit when the Agreement of Sale did not have a specific contingency in it for the sale of the buyer's house?A. The most commonly used form in Pennsylvania for the sale of residential real estate is the Pennsylvania Association of Realtors (PAR) form agreement of sale. Under that form, if the buyer fails to obtain a mortgage due to the failure to sell the buyer's residence, the agreement calls for the buyer to receive a refund of its deposit. Of course, whether the buyer has met all if its obligations under the agreement of sale may become an issue. Additionally, the most recent residential PAR form also states that if the buyer's mortgage commitment contains a condition regarding the sale of real estate owned by the buyer which was not otherwise provided for in the agreement of sale, the seller has the right to terminate the agreement of sale without having to wait for closing.
Q. Should buyers purchase title insurance?A. Yes. Although a lender will likely require the buyer purchase it, generally, buyers should purchase title insurance. In short, subject to the conditions and exclusions in the title policy, title insurance insures against defects in the chain of title to property. Title insurance is unlike most forms of insurance, which are prospective. For a one time fee, title insurance provides insurance for things that happened in the past. Unless otherwise exhausted, a title insurance policy will last as long as the buyer owns the property. It provides insurance against the possibility that the property being purchased is not actually owned by the seller, defects in title cause by such things as forgeries and improper recording or indexing, unpaid taxes, unmarketable title, and a lack of a right of access to the property.
Q. How much does Title Insurance Cost?A. Title insurance is relatively inexpensive compared to the cost of real estate. Title insurance companies are required by Pennsylvania law to file their rates with the Department of Insurance. Then the title insurance company can satisfy this requirement by becoming a member of the Title Insurance Rating Bureau of Pennsylvania (TIRBOP), which publishes a ratings manual disclosing the schedule of rates charged by its members, along with the form of title policies and endorsements used. The cost of a title insurance policy depends on the amount of title insurance provided (which is usually tied to the purchase price and/or loan amount). Of course, there may be additional charges for certain endorsements and under certain circumstances. For a schedule of rates, visit TIRBOP's website at http://www.patitleratingbureau.org/
Q. How long does a party have to file a lawsuit?A. Pennsylvania enforces different statute of limitations (the time in which you must bring your claim) for different causes of action. For example, under Pennsylvania law, a suit against a home inspector must be brought within one (1) year of the date the home inspection report is given to the buyer. The Pennsylvania Seller Disclosure Law requires the suit to be filed within two (2) years of the date closing.
As with any question regarding the applicable statute of limitations, there is not always a simple answer to the question. For instance, while the limitation period for fraud and negligence is two (2) years, whether a particular statute of limitations has passed may depend on other factors, including but not limited to when the party knew or should have known about the claim. As a result, the applicable limitation period must always be reviewed by competent counsel to see which limitations period should apply, whether the time periods are extended or tolled based on a multitude of factors (such as when the aggrieved person found out about the matter complained of - commonly referred to as the discovery rule), whether any conduct on the part of any defendant serves to extend the applicable limitations period, etc.
As always, questions regarding any of the above should be directed to competent legal counsel.
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