Arkansas Disclosure Obligations
Despite being in a “caveat emptor” state, Arkansas home sellers might want to make some disclosures to property buyers.
Lack of Real Estate Seller Disclosure Requirement in Arkansas
Arkansas has no law that requires you to give a formal disclosure statement to a potential buyer of your house. In fact, Arkansas courts enforce caveat emptor clauses in purchase contracts. Under this doctrine (“let the buyer beware”), judges ordinarily refuse to compensate buyers for home defects found after the purchase unless the seller did something to actively prevent the buyer from inspecting the property to find all of the defects.
Federal Law Requires Some Sellers to Disclose Lead-Based Paint Hazards
If the home you plan to sell was built before 1978 (unless it’s a foreclosure property sold “as is”), you must, in order to comply with federal law, take the steps described in Seller Responsibility to Disclose Lead-Based Paint Hazards.
Disclosure Rules for Arkansas Real Estate Agents
Despite the caveat emptor doctrine, the Arkansas Real Estate Commission (AREC), which issues licenses to real estate agents, has created a set of regulations relevant to disclosures of property defects.
Under AREC Regulation 10.6, a real estate agent must “exert reasonable efforts” to ascertain facts that are material to the property’s value or desirability, so as to become “informed about its condition and thus able to avoid intentional or negligent misrepresentation to the public.”
A reputable real estate agent cannot, for example, sell a house with basement that regularly floods and neglect to mention that ‘little fact’ when talking with potential buyers. (At least, not without risking a loss of professional license.)
There are limits to the agent’s responsibilities here. Arkansas law says that the existence of any facts, circumstances, or suspicion that the property might be psychologically impacted (perhaps is haunted or was the site of violent or notorious events) is not a material fact that agents must disclose. Nor do they need to inquire about or disclose information about whether the property is located in the vicinity of a sex offender. (See Arkansas Code §§ 17-10-101 and 12-12-903.)
Nothing in the statutes or rules requires the agent to perform a complete floor-to-ceiling investigation of your home before approaching buyers, however. Nor do the rules require them (or you) to hire a professional inspector to find potential physical defects. The buyer will likely want to hire an inspector for this purpose, but neither you nor your real estate agent need to pay for that.
Value of Making Real Estate Disclosures to Arkansas Home Buyers
You might be surprised to learn that there are long-term benefits and protections associated with making disclosures; and that, as a result, many Arkansas sellers proactively do so.
Your real estate agent can offer you a version of the “Arkansas Seller’s Property Disclosure Form.” It will likely ask you to check “Yes,” “No,” “Don’t Know,” or “N/A” in response to questions about your property.
For example, expect to be asked how old the home is, whether it contains termites or hazards like asbestos, radon, toxic mold, or formaldehyde, and whether you are aware of any systems that need repair or replacement. Your answers should give potential buyers a fairly comprehensive snapshot of any known defects or issues with your property. The form also gives you additional space to explain any of your responses to those questions in greater detail.
What is the value of this disclosure form? First, it sets clear expectations, and could smooth negotiations while you’re in escrow. The buyer will see from the start that you are being open about the condition of the house, and have less reason to react with shock and dismay if and when the inspection report turns up defects.
Second, the disclosure prevents the buyer from later claiming that he or she did not know about a particular defect, and then potentially suing you for breach of contract or fraud. The buyer might eventually lose the legal arguments, but you would be forced to hire an attorney and engage in the stress of litigation. Making a full and forthright disclosure would ensure that the buyer’s expectations match reality from the start.