Wednesday, July 11, 2018

Sellers Now Have To Disclose Insurance Claims In Their Real Estate Condition Report

As an attorney who primarily represents buyers in court, I regularly conduct discovery on insurance claims filed by sellers.  Evidence that sellers filed an insurance claim based on the same condition that they later failed to disclose to buyers in their Real Estate Condition Report is pure gold.  Such evidence establishes that the condition existed and that the sellers thought that it was significant enough to file an insurance claim.  Sellers have a really hard time explaining why they checked "NO" to a property condition statement relating to flooding or leaks when they got $10,000 from their insurance company for basement flooding.

The new Real Estate Condition Report required by Wis. Stat. § 709.03 mitigates against such situational candor through requiring sellers to answer the following question:

Have you filed any insurance claims relating to damage to this property or premises within the last five years?

Please note that there is no exception based on the sellers' subjective belief that they have resolved whatever condition caused the damage.  If the seller has filed an insurance claim within the last five years, he or she must answer this question "YES."  The seller should explain his or her "YES" response at the end of Section G, preferably through attaching documents relating to the insurance claim.

Of course, I have also discovered that sellers "forget" to disclose conditions in their Real Estate Condition Report that previously caused them to make a warranty claim against the manufacturer of their roofing shingles, participate in a class action settlement against their siding manufacturer, or even sue their seller for misrepresentation.

Since the Real Estate Condition Report still does not specifically require sellers to disclose such claims, I sometimes write language in offers requiring sellers to provide copies of all warranties and any warranty claims.  You can also find any legal actions that your sellers have filed (or have had filed against them) in Wisconsin courts through Wisconsin Circuit Court Access.     

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